Nearly all New Zealand’s electricity supply passes through one of 175,000 or so distribution transformers owned by network companies, or a smaller number owned by end-user businesses.  A small proportion of this energy is dissipated as heat in the process.  This proportion depends on the design of each transformer.

This study for EECA was prompted by an Australian proposal to introduce a minimum energy performance standard (MEPS) in 2004.  Part of the impetus was that if New Zealand did not follow suit, Australia would have needed to introduce a temporary exemption under TTMRA to exclude non-complying transformers from being imported from or through New Zealand.  Indefinite extension of this would have created problems under CER.

The minimum efficiency levels in the proposed MEPS were such that nearly all the distribution transformers then being delivered to the New Zealand market already met, or very nearly met, the standard.  This was partly due to the tolerances that were built into the testing standards AS 2374.1 (oil filled type) and AS 2735 (dry type), under which transformers were considered compliant, even if they fell appreciably short of the nominal requirements.

As a result, implementation of the proposed MEPS could not be expected to result in any increase in the efficiency of the distribution transformers being installed beyond the then current level.  Benefits, however, could be expected from preventing a decline in efficiencies due to buyers preferring to minimise first-cost, rather than lower losses.

The study reviewed the benefits and costs increasing distribution transformer efficiencies from studies by the EU and the US Department of Energy.  The EU study reported paybacks ranging from 4.6 years down to 1.4 years.  Applying a 10% discount rate and a 30 year life gave benefit-to-cost ratios from 2.0 to 6.7.   Detailed work done in the USA provided some guide to the costs and benefits for smaller transformers and dry types.  This indicated that payback period for a 25 kVA transformer could be around 4.3 years, with a benefit to cost ratio of 2.2.  For a 300 kVA dry type transformer a payback period of around 2.6 years, with a benefit to cost ratio of 3.6 was indicated.  All these results showed the MEPS efficiency requirements to be well within the economically desirable range.

A national analysis showed that avoiding a fall in transformer efficiencies would reduce electricity losses over the country, but the effects will accumulate slowly over a lengthy period.  It was estimated that the extra losses could reach 350 GWh a year after 30 years, then worth some $30 million per year.  The costs were more immediate.  As a result the expected net benefit was negative in the initial years but then progressively improved, as shown in the figure.

The NPV of the net benefit with a 10% discount rate over 30 years was $32.6 million.  This was the total of NPV’s of $56.1 million for the benefits, offset by $23.5 million for the costs.

The study concluded that:

1. Australia, and New Zealand if they acted jointly, would be the first countries in the 50 Hz world, and the second (equal) in the world as a whole, to introduce MEPS for distribution transformers, although other countries were considering it;
   

2. introducing a MEPS for distribution transformers in common with Australia would prevent a significant dis-benefit developing;
   

3. in the absence of a MEPS the competitive position of the New Zealand and Australian transformer manufacturers would be threatened by low priced imports from China;
   

4. New Zealand and Australian manufacturers were already producing distribution transformers that met the “Minimum” efficiency level set in AS 2374 1.2.  Consequently introducing a MEPS with that requirement would not have resulted in a loss of competition in the distribution transformer market;
   

5. introducing a MEPS at short notice with the minimum set at the “High” efficiency level of AS 2374 1.2 would result in a significant loss of competition in the distribution transformer market;
   

6. not introducing a MEPS for distribution transformers would create difficulties under TTMRA;
   

7. the value of the avoided increase in generation outweighed the lost savings in transformer manufacturing costs that would result from the proposed MEPS for all sizes and types of distribution transformers within the MEPS’ coverage; and
   

8. to minimise TTMRA issues the timing of the introduction of the proposed MEPS should preferably be aligned with that in Australia.
   

It was recommended that:

1. New Zealand implement a MEPS for distribution transformers;
   

2. New Zealand adopt the Australian standards AS 2374 and AS 2735, and the proposed part AS 2374.1.2, with suitable modifications, as New Zealand standards for distribution transformers; and
   

3. the timing of the start of the MEPS in New Zealand should be aligned with that of the corresponding MEPS in Australia.