Loss evaluation is a procedure by which the buyer and seller achieve an economic balance in adding material to the transformer design to get lower losses. It is achieved by establishing a value in dollars per kilowatt for load loss and a similar value for no-load loss.

An incremental investment in capacity is required to generate power to supply loss and bring it to the transformer. In addition, there is a continuing expense for fuel to supply the lost power.

The continuing expense is converted to present worth and added to the incremental investment to give the total present worth of the loss. This present worth of a kilowatt of loss is naturally higher for the noload loss, which is continuous, than it is for the load loss, and the value is higher the farther the transformer is from the generator; the values will of course depend on the accounting rules and procedures in force at the particular location.

The following equations are commonly used to establish loss evaluations:

VL = S + (8760EFL/R); VS = S +(8760 EFS/R) where:

E = dollars per kilowatthour cost of energy (this can conceivably be very low for a hydro station but can range up to 0.02 or more for fuel-fired stations, depending on fuel cost, and, of course, the figure will be even higher at locations remote from the generating station)
FL = ratio of average load loss to rated load loss
FN = ratio of average no-load loss to rated no-load loss (1.00 for continuous operation)
R = per unit (%/100) annual carrying charge on system investment (covers insurance, taxes, depreciation, and return on investment)
S = dollars per kilowatt system investment (200 and up, depending on the system investment out to the transformer location)
VL = dollars per kilowatt evaluation of rated load loss, and VN = dollars per kilowatt evaluation of rated no-load loss.

Since the load losses of a transformer vary as the square of the load, it is important to state the MVA rating at which the load losses will be evaluated. Since it is common practice of most transformer manufacturers to optimize the design of the transformer at its self-cooled rating, the dollar
value of losses for the load loss should be specified at the self-cooled rating.

If the dollar value of losses for the load loss is specified at some load other than the self-cooled rating, it can be adjusted to the self-cooled rating by multiplying the dollar value by the square of the ratio of the load at which the losses will be evaluated and the self-cooled rating.

It is also important that the transformer manufacturer knows if the buyer is using the present worth, the levelized annual cost, or the capitalized cost method of evaluation. If the present worth method is being used, the present-worth multiplier should be stated; if the levelized annual cost method is being used, the carrying charge should be stated so the manufacturer, in either case, knows how the dollar values of losses equate to the first cost of the transformer.

Loss evaluation is an important factor in purchasing new transformers, as in many cases the evaluation of the total loss equals or exceeds the price of the transformer.

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