EcoDry distribution transformers: “Ecology for free”

An investment is the purchase of an asset with the target to create future income or savings which are higher than the original purchase cost.

Industrial plants or large commercial or public buildings are often connected to the medium voltage distribution grid and contain distribution transformers. Dry-type distribution transformers do not contain any flammable liquids and are intrinsically safe. They are the preferred choice for such installations.

The market offers different types of dry transformers. A product recently developed is the EcoDry transfor­mer, addressing ultra-high efficiency and significantly reducing the energy losses of the transformer. They use a core made of amorphous metal. Amorphous metal has a glass-like and not a crystalline structure.

Since "there's no such thing as a free lunch", the tag of an amorphous metal core is its higher cost. On the other hand the reduced energy loss creates future savings and this brings us to an investment consideration.

An investment in higher transformer efficiency is profitable or not depends on the cost difference between ultra-efficient and standard transformer, and on the specific electricity cost and application. Taking the EU countries as an example, the 2013 electricity costs for customers with a large consumption¹ of 500-2,000 MWh/yr vary, according to Eurostat, between 7.5 cents euro/kWh (Finland) and 20.5 c/kWh (Cyprus)². Besides the islands Cyprus and Malta (18 c/kWh), also Italy (16.8 c/kWh) and Germany (14.4 c/kWh) have high cost, while UK and Spain are with 12 c/kWh only little above EU average.

Investments in industrial production lines require a short amortization time of a few years only. For equipment like a distribution transformers which is more related to "infrastructure" than a specific production line, the amortization time may be somewhat longer. Eight years is a typical value. A company considers in its investment decision its cost of capital. The Weighted Average Cost of Capital (WACC) is typically used, which takes into account costs of equity and costs of third party depts. A 10% WACC is a typical value.

Knowing the difference in no-load loss, the electricity price, the industry or company specific WACC, and the time period considered, the Present Value (PV) of the energy savings can be calculated. Using the above parameters this is done for an industrial application in different countries.

An investment in a commercial building is a long-term investment. The building can be used for a longer period without requiring significant additional investments and the risk for the investment is lower than in case of an industrial production line. The period considered in the investment calculation is therefore longer and the WACC lower. We assume 15 years and WACC=7% in our example and calculate again the PV of the energy savings.

Present Value (PV) of electricity saving inItaly with electricity costs 0.168 EUR/kWh.

PV of electricity saving in UK or Spain with electricity costs 0.120 EUR/kWh

The PV of electricity savings is very significant and as long as the additional cost of an ultra-efficient transformer is less than the PV, the investment pays off. And there is additionally "a thing like a free lunch" because there is the positive environmental effect of the lower losses. The CO2 emission of power generation depends on the specific country. Taking the European electricity mix as reference³, the electricity saved by a 1 MVA EcoDry transformer during a 20 years period is equivalent to 137,000 kg of CO2 or the combustion of 52,000 liter of Diesel. Using EcoDry transformers means: you do a financially attractive investment and additionally contribute to our environment.

1 - The consumption of a typical 4-person household is 5 MWh/yr
2 - Costs excluding refundable taxes and fees, like VAT
3 - 0.5 kg CO2-eq/kWh