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Economic evaluation of transformer selection in electrical power systems

Conference Paper · October 2010

DOI: 10.1109/ICELMACH.2010.5607904 · Source: IEEE Xplore

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 XIX International Conference on Electrical Machines - ICEM 2010, Rome
Economic Evaluation of Transformer Selection
in Electrical Power Systems
Eleftherios I. Amoiralis, Marina A. Tsili, Antonios G. Kladas
Φ
Abstract – Owing to deregulation, privatization and
competition, estimating financial benefits of electrical power
system projects is becoming increasingly important. In other
words, it is necessary to ensure that a project is profitable. In
this work, a real-life example of a detailed analysis for the least-
cost choice of a transformer is carried out, showing how the
higher price of a facility can be traded against its operational
cost over its life span.
Index Terms-- Distribution transformers, Power system
economics.
I. INTRODUCTION
P ROJECTS in the electrical power systems live for a long
time. Usually, 25 to 30 years is a normal useful life for a
conventional transformer, which is one of the three main
parts of a power system (power station and lines are the
remaining elements). For power generation projects most
expenditure, in the form of operational cost, i.e. fuel and so
on, as well as income occur after commissioning. Such
future financial flows will take place during different times
and circumstances. Correspondingly, these will have
different value of money than flows occurring during project
evaluation. Thus, the time value of money and the choice of
a proper discount rate are highly important for capital
intensive long-life projects with large operational cost, like
those of an electrical power system.
Since transformers constitute some of key energy-
consuming products in power systems (contributing to both
variable and fixed network losses), the cost-effective
potential from the selection of improved energy efficiency
during the installation of new transformers or the retrofitting
of existing transformers can result to significant benefits for
electric utilities [1]-[3]. This trend is also enhanced by the
recent developments in transformer technology, able to
provide high efficient designs at a non restricting
manufacturing cost. The decision as to whether to purchase a
low-cost, inefficient transformer or a more expensive,
energy-efficient transformer, is primarily an economic one
[4]. A common practice used for determining the cost-
effectiveness of distribution transformers is based on the
total owning cost (TOC) method, where TOC is equal to the
sum of transformer-purchasing price plus the cost of
transformer losses throughout the transformer lifetime [5].
Different implementations of the TOC method are
encountered in the relevant bibliography, adopted by electric
utilities [6]-[8] or industrial and commercial transformer
users [9],[10].
In the present paper, an assessment of the benefits
resulting from the installation of energy efficient
Φ
E. I. Amoiralis is with the Department of Production Engineering &
Management, Technical University of Crete, GR-73100, Chania, Greece (e-
mail: eamir@tee.gr).
M. A. Tsili and A. G. Kladas are with the Faculty of Electrical &
Computer Engineering, National Technical University of Athens, GR-
15780, Athens, Greece (e-mail: mtsili@central.ntua.gr,
kladasel@central.ntua.gr).
978-1-4244-4175-4/10/$25.00 ©2010 IEEE
transformers in distribution networks is realized through a
proper economic evaluation method. The proposed method
involves the incorporation of the discounted cost of
transformer losses to their economic evaluation, similarly to
the TOC method, providing the ability to take into account
variable energy cost during the transformer operating
lifetime. Therefore, different loss cost during peak and off
peak load hours can be used for the overall energy loss cost
calculation, instead of a mean energy loss cost value that is
usually adopted in the TOC method. The method is applied
in real-life study cases and sensitivity analysis is carried out,
yielding detailed results of the substantial overall economic
profit resulting from the investment to high efficiency
transformers.
II. TRANSFORMER ECONOMIC EVALUATION
A. Input Data of the Study Case
In this section, a real-life example of a detailed analysis
for the least-cost choice of a transformer is presented. It
shows how the higher price of a facility can be traded against
its operational cost over its life span. The example considers
two offers for distribution transformers. Different
transformer designs can be developed to meet the
requirements of a particular transformer specification. These
designs will have varying amounts of core steel and copper
or aluminum conductors with differing no-load and load
losses. The lowest cost design that meets all the applicable
performance standards and requirements is generally
referred to as the standard efficiency design [11]. In the
examined case study. the first transformer offer is the
standard efficiency design, corresponding to lower bid price
but higher losses. The two transformer offers have the
technical characteristics presented in Table I.
TABLE I
TRANSFORMER TECHNICAL SPECIFICATIONS
Transformer Size Bid Price No load losses Load losses
(kVA) (€) (kW) (kW)
Offer A 1000 9074 1.1 9
Offer B 1000 11362 0.94 7.6
The transformers are assumed to be loaded at 50% of full
load at the first year, and each year there is 3.7% increase of
the load. Fig. 1 illustrates the transformer load factor
variation during the study period. In this study case, the
expected life of the project is 30 years and a discount rate of
6% is considered.
In order to choose the least-cost solution it is required to
consider the total cost of the project over its expected life
span. This includes the bid price of the two transformers plus
their discounted cost of losses, i.e. no load losses and load
losses. It is assumed that reliability of the transformers will
be the same as well as their maintenance cost. For the sake
of simplicity, these were ignored from the comparison. The
input data of this case study are illustrated in Table II.
TABLE III
ANNUAL LOAD LOSSES OF THE TWO TRANSFORMER OFFERS
Year Load factor Load losses Load losses
(%) of Offer A (kW) of Offer B (kW)
1 50.00 2.250 1.900
2 51.75 2.410 2.035
3 53.56 2.582 2.180
4 55.44 2.766 2.336
5 57.38 2.963 2.502
Fig. 1. Transformer load factor variation for a period of study equal to 30 6 59.38 3.174 2.680
years. 7 61.46 3.400 2.871
TABLE II 8 63.61 3.642 3.076
INPUT DATA
9 65.84 3.901 3.295
Input data Values 10 68.14 4.179 3.529
Discount rate (%) 6 11 70.53 4.477 3.781
Load factor (%) 70 12 73.00 4.796 4.050
Average losses (LF) 0.522 13 75.55 5.137 4.338
Energy cost 16h of peak (€/kWh) 0.087 14 78.20 5.503 4.647
Energy cost 8h of off-peak (€/kWh) 0.043 15 80.93 5.895 4.978
Study period (yr) 30 16 83.77 6.315 5.333
17 86.70 6.765 5.713
B. Transformer loss cost
18 89.73 7.247 6.120
It has to be realized that copper (load) losses at any time
19 92.87 7.763 6.556
are equal to full load copper losses kW (denoted C)
20 96.13 8.316 7.022
multiplied by the square of the transformer’s utilization
21 99.49 8.908 7.523
factor, i.e.:
2
22 102.97 9.543 8.058
⎛ demand ⎞ 23 106.58 10.223 8.632
C = load losses ⋅ ⎜ ⎟ (1) 24 110.31 10.951 9.247
⎝ rated capacity ⎠ 25 114.17 11.731 9.906
26 118.16 12.566 10.611
Therefore, the load losses of the two examined 27 122.30 13.461 11.367
transformers for each year of the study (based on the 28 126.58 14.420 12.177
respective load growth rate) are presented in Fig. 2. For 29 131.01 15.447 13.044
example, the load losses of the transformer offer A for the 30 135.59 16.547 13.973
first year of the study at half load are:
2
⎛ 0.5 ⋅1000 kVA ⎞ To work out the annual energy losses, the load factor and
C = 9 kW ⋅ ⎜ ⎟ = 2.25 kW shape of the load curve plays a significant role. Usually, the
⎝ 1000 kVA ⎠ loss factor (LF) derives from the load factor (lf), i.e. the
mean transformer loading over its lifetime, represented as
Likewise, the load losses of the transformer offer B for equivalent percentage of its nominal power, as follows:
the first year of the study at half load are:
2
LF = 0.15 ⋅ l f + 0.85 ⋅ l f 2 (2)
⎛ 0.5 ⋅1000 kVA ⎞ With a load factor of 70%, the loss factor will be
C = 7.6 kW ⋅ ⎜ ⎟ = 1.9 kW equivalent to 0.52. The load factor is considered constant
⎝ 1000 kVA ⎠ during peak and off-peak hours, assuming that the load that
18
Offer A Offer B
is served by the distribution transformer is constant
15 throughout the day (the terms ‘peak’ and ‘off-peak’ load,
Load losses (kW)

13 which correspond to different energy prices, refer to the

10 system load and not the distribution transformer load, as
8 explained in the followings).
5 In order to compute the value of losses, these have to be
3 multiplied by the marginal cost of the energy at the
0
substation site. This may be significantly lower than the
50 70 90 110 130
tariff if the transformer is part of the utility system. Usually,
load factor (%) a two-part energy cost is considered: a ‘peak’ energy cost
Fig. 2. Load losses of the two transformer offers, based on the load factor during the 16 hours of peak load and an ‘off-peak’ energy
of Fig. 1. cost for the off-peak load 8 hours. The peak cost was chosen
based on the mean value of the energy cost in the Greek
power system for the year 2008, as provided by the hourly
data for the system marginal price of the Hellenic
Transmission System Operator [12], yielding a value of
0.087 €/kWh. A peak/off-peak load cost ratio equal to 2 is
considered (i.e. the off-peak energy cost is considered half of 18 22071 11035
the peak energy cost, namely 0.043 €/kWh). 19 23643 11821
Last but not least, a very important finance factor during 20 25327 12663
the economic evaluation of the transformer selection is the 21 27131 13565
annuity factor. This factor depicts the present value at a 22 29063 14532
discount rate r of an annuity of 1€ paid at the end of each n 23 31133 15567
periods: 24 33351 16675
1 1 25 35726 17863
Annuity factor = − (3) 26 38271 19135
r r ⋅ (1 + r )n
27 40997 20498
Taking into consideration the input data of Table I, the
28 43917 21958
variation of the annuity factor for a study period equal to 30
29 47045 23522
years is presented in Fig. 3.
30 50395 25198
16
14
12 For example, at the first year of the study, the annual
energy corresponding to peak load losses, LLp (kWh), as
annuity factor

10
8 well as the annual energy corresponding to off-peak load
6 losses, LLop (kWh), are computed as follows:
4
2
LLp = 2.25 kW ⋅16h ⋅ 365 ⋅ 0.522 = 6853 kWh
0
LLop = 2.25 kW ⋅ 8h ⋅ 365 ⋅ 0.522 = 3426 kWh
0 5 10 15 20 25 30
study period (years)
Therefore, the energy corresponding to the total losses,
Fig. 3. Annuity factor variation, based on the input data of Table I. i.e. load losses and no load losses, of peak (TLp in kWh) and
off-peak rate (TLop in kWh), are given based on the
C. Economic evaluation of offer A
following equations:
Costs of no load losses and load losses are calculated at n
the peak (16 hours) and off-peak rate (8 hours). TLp = ∑[ ( LLp (i) + NLLp (i) ) ⋅
Since no load losses are constant through the study i =1 (4)
period, the annual energies corresponding to peak and off-
peak no load losses values, NLLp and NLLop respectively, are ( annuity factor (i) − annuity factor (i −1) ) ]
computed as follows:
NLLp = 1.1kW ⋅16h ⋅ 365 = 6424 kWh n
TLop = ∑[ ( NLL op (i) + LLop (i) ) ⋅
NLLop = 1.1 kW ⋅ 8h ⋅ 365 = 3212 kWh i =1 (5)
In order to compute the energy corresponding to the peak ( annuity factor (i) − annuity factor (i −1) ) ]
and off-peak load losses values, transformer loading per year where the index i refers to the current year of the study (i.e.
should be taken into account. To be more precise, based on NLLop(3) is the energy corresponding to off-peak no load
Table II, the annual energy losses corresponding to peak and losses of the third year), and annuity factor (-1) is equal to
off-peak load losses for Offer A are calculated (Table IV). zero.
Using eq. (4) and eq. (5), we get:
TABLE IV
ANNUAL ENERGY CORRESPONDING TO LOAD LOSSES OF OFFER A TLp = 157655kWh and TLop = 315309kWh
Year Annual energy Annual energy The cost of losses of peak (CLp in €) and off-peak rate
corresponding to corresponding to off-
(CLop in €) are:
peak load losses peak load losses (kWh)
(kWh) CLp = 315309kWh ⋅ 0.087euros / kWh ⇒
1 6853 3426
2 7341 3670
CLp = 27432euros
3 7863 3932 and
4 8423 4212 CLop = 157655kWh ⋅ 0.043euros / kWh ⇒
5 9023 4512
6 9666 4833 CLop = 6779euros
7 10355 5177 Thus, the total cost of offer A is the summation of the
8 11092 5546 cost of losses (peak and off peak rate) and the price of the
9 11882 5941 transformer A, namely:
10 12728 6364 Offer A cos t = CLp + CLop + Bid Pr ice ⇒
11 13635 6818
12 14606 7303 Offer A cos t = 27432 + 6779 + 9074 ⇒
13 15647 7823
Offer A cos t = 43285euros
14 16761 8380
15 17955 8977 D. Economic evaluation of offer B
16 19234 9617 Costs of no load losses and load losses are calculated at
17 20603 10302 the peak (16 hours) and off-peak rate (8 hours).
 Since no load losses are constant through the study CLp = 267154kWh ⋅ 0.087euros / kWh ⇒
period, the annual energies corresponding to peak and off-
peak no load losses values, NLLp and NLLop respectively, are CLp = 23242euros
computed as follows: and
NLLp = 0.94 kW ⋅16h ⋅ 365 = 5490 kWh CLop = 133577kWh ⋅ 0.043euros / kWh ⇒
NLLop = 0.94kW ⋅ 8h ⋅ 365 = 2745 kWh CLop = 5744euros
In In order to compute the energy corresponding to the Thus, the total cost of offer B is the summation of the cost
peak and off-peak load losses values, transformer loading of losses (peak and off peak rate) and the price of the
per year should be taken into account. As in the case of Offer transformer B, namely:
A, based on Table II, the annual energy losses corresponding
to peak and off-peak load losses for Offer B are calculated
Offer B cos t = CLp + CLop + Bid Pr ice ⇒
(Table V). Offer B cos t = 23242 + 5744 + 11362 ⇒
TABLE V
ANNUAL ENERGY CORRESPONDING TO LOAD LOSSES OF OFFER B Offer B cos t = 40348euros
Year Annual energy Annual energy For the above analysis it is clear that the life span cost of
corresponding to peak corresponding to off- the first alternative Offer A is 43285€, while that of Offer B
load losses (kWh) peak load losses (kWh) is 40348€. These values correspond to a difference of 7.3%
1 5787 2893 between the cost of Offer A and Offer B. Fig. 4 presents the
2 6199 3099 participation of bid price and peak and off-peak rate loss
3 6640 3320 costs in the overall costs of the two offers.
4 7113 3557 Cost of off-peak rate losses (€)
5 7620 3810 50000 Cost of peak rate losses (€)
Bid price (€)
6 8163 4081 45000
7 8744 4372 40000 6779
8 9367 4683 35000
5744

9 10034 5017
30000
10 10748 5374
Cost (€)

11 11514 5757 25000

27432 23242
12 12334 6167 20000

13 13213 6606 15000

14 14154 7077 10000
15 15162 7581 11362
5000 9074
16 16242 8121
0
17 17399 8699
Transformer A Transformer B
18 18638 9319
19 19965 9983 Fig. 4. Cost results for transformer offers A and B.
20 21387 10694
21 22911 11455 Therefore, Offer B is the least-cost alternative, although
22 24542 12271 it is more expensive. This real-life example shows how
23 26290 13145 operational costs of almost all energy consuming facilities in
24 28163 14081 the electrical power system play a more significant role in
25 30169 15084 the overall life span cost that the investment cost.
26 32318 16159 E. Sensitivity analysis
27 34619 17310 The discount rate is one of the major parameters
28 37085 18543 determining the outcome of an economic evaluation process.
29 39727 19863 Other factors such as the daily fluctuation of the energy loss
30 42556 21278 cost or the load factor influence significantly the results of
the analysis. For a comprehensive overview of this
For example, at the first year of the study, the annual influence, a sensitivity analysis has been carried out,
energy corresponding to peak load losses, LLp (kWh), as concerning these factors. Considering as base case the results
well as the annual energy corresponding to off-peak load of the previous subsections (difference between the cost of
losses, LLop (kWh), are computed as follows: Offer A and Offer B equal to 7.3%, for a discount rate equal
LLp = 1.9 kW ⋅16h ⋅ 365 ⋅ 0.522 = 5787 kWh to 6% and peak to off-peak energy cost ratio equal to 2), Fig.
5 presents the sensitivity parameter analysis results, based on
LLop = 21.9kW ⋅ 8h ⋅ 365 ⋅ 0.522 = 2893 kWh various parameter values. Each time, one parameter is
Using eq. (4) and eq. (5), we get: modified, while the other parameters are assumed to remain
at their base case values. For example, by changing the
TLp = 267154kWh and TLop = 133577kWh discount rate by +10%, the difference between Offer A and
The cost of losses of peak (CLp in €) and off-peak rate Offer B changes by -8.6% in comparison to the base case.
(CLop in €) are: The slope of each curve of the sensitivity graph of Fig. 4
indicates the relative degree of sensitivity of the result to
each parameter: the steeper the slope of a curve, the more
sensitive the cost difference is to the parameter, [13]. Given
the results of Fig. 5, the load factor is the parameter that
influences the most the results. It must also be noted, that in
case that a constant energy loss cost is considered in the
analysis (i.e. the value of 0.087€/kWh is the same for peak
and off-peak load hours and the peak to off-peak energy cost
ratio is equal to 1), the difference between the cost Offer A
and Offer B becomes equal to 8.6% (instead of 7.3%).
Therefore, the benefit from the installation of transformer B
appears to be 17.8% greater compared to the more realistic
approach of adopting a reduced energy loss cost during off-
peak load hours, a difference that alters significantly the
perspective of the economic analysis. This difference is not
visible in Figure 6, since it corresponds to peak to off-peak
energy cost ratio variation equal to -50%, which is outside
the limits of the sensitivity graph.
discount rate
Peak/Off-Peak40 Energy Loss Cost
load factor
30
Variation of difference between
20
Offer A and B (%)
10
0
-20 -15 -10 -5 0 5
-10
-20
-30
-40
Parameters variation (%)
Fig. 5. Sensitivity Analysis.
III. CONCLUSIONS
In the present article, the importance and the potentials to
improve power systems efficiency through the installation of
energy efficient transformers was investigated. The analysis
was performed through proper transformer economic
evaluation methods, taking into account the energy loss
consumption and its daily price fluctuation, revealing new
aspects that must be taken into account during the definition
of the transformer purchasing policy of electric utilities. The
main conclusions of the study can be summarized as
follows: i) investment to low efficiency decreases the initial
capital cost, but results to higher energy costs during the
transformer lifetime, yielding transformers with low
manufacturing cost non-profitable in the long term, ii) the
choice of the most profitable among transformers with high
degrees of efficiency must be based on the optimum balance
between the initial purchasing cost and the energy savings
through the transformer lifetime. The proposed analysis can
be easily expanded to take into account different scenarios of
energy pricing and loading variation (according to the
conditions that occur during winter or summer season and
the type of the served load) and investigate their effect on the
profit from the installation of high efficiency transformers.
IV. REFERENCES
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investments into electric networks. An update,” Final Report
submitted to European Copper Institute (ECI), KEMA, Bonn, January
2009.
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[3] European Commission, “The scope for energy saving in the EU
through the use of energy-efficient electricity distribution
transformers,” European Communities, 1999.
[4] B. W. Kennedy, Energy efficient transformers. McGraw-Hill, 1998.
[5] P. S. Georgilakis, E. I. Amoiralis, “Distribution Transformer Cost
Evaluation Methodology Incorporating Environmental Cost”, IET
Generation, Transmission & Distribution, vol. 4, no. 7, pp. 861-872,
July 2010.
[6] D. L. Nickel, and H. R. Braunstein, “Distribution transformer loss
evaluation: I – Proposed techniques,” IEEE Trans. Power Apparatus
and Systems, vol. 100, no. 2, pp. 788-797, 1981.
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IEEE Trans. Power Apparatus and Systems, vol. 100, no. 2, pp. 798-
811, 1981.
[8] E. Amoiralis, P. Georgilakis, M. Tsili, “Utility-based economic
assessment of distribution transformers considering specific load
characteristics and environmental factors,” Journal of Optoelectronics
and Advanced Materials, Vol. 10, No. 5, May 2008, p. 1184 – 1191.
[9] S. Merritt, and S. Chaitkin, “No load versus load loss,” IEEE Industry
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and Interconnection Data. Available:
http://www.desmie.gr/content/values_xls.asp?lang=1.
[13] W. G. Sullivan, E. M. Wicks, and J. T. Luxhoj, Engineering Economy.
Prentice Hall, 13th edn., 2006.
V. BIOGRAPHIES
Eleftherios I. Amoiralis was born in Greece, in 1980. He received the
Diploma in Production and Management Engineering, the M.Sc. in
Industrial Engineering, and the Ph.D. degree in the field of Electric Power
Systems from the Technical University of Crete (TUC), Greece, in 2004,
2005, and 2008, respectively. From 2005 to present, he is with Schneider
Electric AE as a freelancer. In 2001 and 2002, he has worked as an intern at
the Public Power Cooperation, of Greece. Since 2004, he has been occupied
as research associate in many research projects. His current research
interests include transformer cost evaluation, energy-efficient transformers,
optimal transformer sizing, transformer design optimization as well as
artificial intelligence. Dr. Amoiralis is member of IEEE and the Technical
Chamber of Greece.
Marina A. Tsili was born in Greece, in 1976. She received the Diploma in
Electrical and Computer Engineering in 2001 and the Ph.D. degree in 2005
from the National Technical University of Athens, Greece. From 2005 to
2006 she worked for the Distribution Division of the Public Power
Corporation of Greece, in high and medium voltage substation studies. In
2007, she joined the Hellenic Transmission System Operator as a power
systems engineer. Her research interests include transformer and electric
machine modeling as well as analysis of generating units by renewable
energy sources. She is a member of IEEE and the Technical Chamber of
Greece.
Antonios G. Kladas was born in Greece, in 1959. He received the Diploma
in Electrical Engineering from the Aristotle University of Thessaloniki,
Greece in 1982 and the DEA and Ph.D. degrees in 1983 and 1987,
respectively from the University of Pierre and Marie Curie (Paris 6), France.
He served as Associate Assistant in the University of Pierre and Marie
Curie from 1984-1989. During the period 1991-1996 he joined the Public
Power Corporation of Greece, where he was engaged in the System Studies
Department. Since 1996 he joined the Department of Electrical and
Computer Engineering of the National Technical University of Athens
(NTUA), where he is now Professor. His research interests include
transformer and electric machine modeling and design as well as analysis of
generating units by renewable energy sources and industrial drives.