1. Aging Power Infrastructure in the US: Towards a SolutionExecutive Summary More than 14,000 residents lose power Tuesday morningThe industry has yet to live down the massive summer blackout, when power outages struck from southern New England to MichiganHeadlines like these were once few and very far between. But the United States aging power infrastructure, plagued with multiple problems, may soon cause such stories to become commonplace.In desperate need of retrieval, the US power grid is anywhere from half a century to a century old. Power outages are still relatively uncommon, but if the situation is not addressed soon, energy shortages can take a staggering toll on the economy. The Energy Bill introduced in the wake of Hurricane Katrina established provisions to encourage approximately $50 billion of investment into the power grid; but the pundits believe that even this would be inadequate, especially in an economy built on information technology and in perpetual need of reliable energy. According to Red Herring Inc., a media company that covers innovation, technology nancing and entrepreneurial activity, energy demand in the US is likely to surge 32% by 2015 and 75%of the countrys power grid will have to be replaced. This whitepaper begins by taking a deeper look at this issue, and also the reforms being instituted to tackle the impending crisis. Transformers are vital components of any power distribution network, and this paper goes on to discuss the advantages of using energy-e cient designs manufactured in environment-friendly production facilities. The rst steps towards a solution are then discussed, laying emphasis on emerging trends such as privatization, venture capitalist investment, high-technology alternatives, and more.Copyright Paci c Crest Transformers Inc. 2007-2009 www.paci ccresttrans.com Towards a Solution01

2. The whitepaper concludes with a detailed look at Paci c Crest Transformers, a pioneer in the transformer industry, building technologically e cient, customized transformers for over 90 years. IntroductionAccording to the United States Energy Department, the demand for electricity in the US is growing at the rate of about 1% a year, with that pace likely to increase over the next few years. Other estimates put the increase at 6% or more per year, thanks to the population growth rate and the burgeoning numbers of electric/electronic devices now considered essential to peoples lifestyles. Weather you use the Red Herring forecast, the more conservative DOE predictions, or something in between, meeting this demand inevitably focuses on power generation, and the vast transmission networks that carry power to end-users. That zooms us in directly to the crux: the aging installed equipment base and high-voltage lines installed mostly in the 1950s which have reached their load carrying capacity At approximately 800,000 MWe of installed capacity and growing, the electric power system in the US is According to the DOE, the the largest in the world. According to the Department of Energy (DOE) 40% of all energy used in the US (oil, current power structure gas, wind, solar) is converted into electricity. Soaringsu ers from power fuel prices at coal and natural gas- red power plants outages and interruptions are pushing electricity prices sharply higher. To makethat cost the economy matters worse, the DOE estimates that distribution$150 billion per outage. transformers which are 30 years old or more, waste disproportionately high kWhs annually. It is this grid that is expected to transmit the additional gigawatts necessary, and link up with wind and solar power harvested from far- ung areas of the country.Fig 1: The North American Power Grid Copyright Paci c Crest Transformers Inc. 2007-2009 www.paci ccresttrans.com Towards a Solution 02 3. Figure 1 above shows the North American Power Grid, serving over 335 million Americans and Canadians. Comprising three independent systems with over 200,000 miles of high-voltage lines, any disruptions can cascade across the entire system in a matter of seconds. Surges or drops in power ows can trip circuit breakers, shutting down power (to safeguard expensive equipment); but restoring power can be a painstaking, time-consuming e ort. Power outages are now increasingly common in the US. They still tend to be rather brief and speci c in terms of geographic scope but not for long. One of the key reasons for the power outages, beside the aging, outdated power grid, is distribution investment. The deregulation wave saw the construction of many power plants, but a sharp drop in grid investments, with the inevitable overloaded lines and reliability issues cropping up. Distribution investment as a percentage of revenue has actually been decreasing from 5.7% in the 1980s and early 1990s to 3.5% in the last decade. As a result, the number of blackouts in the U.S. impacting more than 10,000 customers steadily increased over the past 20 years, reaching a peak in 2004 at close to 100 events. According to the DOE, the power outages and interruptions cost the economy $150 billion annually, much more today than, say, 20 years ago, when digital equipment and appliances had not really proliferated. The research rm Primen, on the other hand, estimates the costs of outages and uctuation in the US to be anywhere from $119 billion to $188 billion per year. Transmission investments by publicly-traded utilities have shown an increase recently, going up to a high of $7.8 billion (up from a measly $2 billion in 1997), but that still doesnt put the grid in a better position. So the question then, is what will? How can this aging unreliable power grid be improved and scaled for e cient operation into the 21st century? Large-scale overhauling is clearly necessary; and thankfully, that seems to be a very real possibility in the immediate future.How the Country Plans to Address the Power CrisisRecently, energy reforms have been identi ed as critical to the economic future of the country and speci c and time-bound targets for the expansion of clean energy in the US have been set. In the process of overhauling the currently outdated power grid, there is an aim to increase the investment in green energy resources like renewable energy. The target is to double the production of electricity from renewable sources in three years and lay thousands of miles of power lines to carry clean energy to di erent parts of the nation. Copyright Paci c Crest Transformers Inc. 2007-2009 www.paci ccresttrans.comTowards a Solution 03 4. Some Suggestions to Fix the Electricity Grid in the USIn his article in Wired Magazine, titled, Power to the People: 7 Ways to Fix the Grid, Now, Brendan I. Koerner o ers some interesting suggestions to address the problem of the failing electricity grid in the US: Establish local-scale solar power generation near end users. Those implementing this can expect to receive a reimbursement of up to 30% of the cost of the solar energy system. Treat electricity like a commodity - something for which demand can be gauged and prices set in advance. Pay big users to cut consumption when the need arises. The resource allocation towards renewable energy has an impressive $2 billion in grants for battery development. This can be used to develop infrastructure that allows solar and wind energy to be banked when abundant and released later when needed. This way, consumers have access to a more reliable and environmentally sound power grid. Lay power cable underground and underwater for speeding up the process.Phasing Out the Old, Bring in the NewOne of the crucial aspects that need to be addressed in the aging power infrastructure is that of transformers. In the process of introducing new technology, there will have to be a conscious and speedy switch over to energy e cient transformers.In a typical grid, transformer loss contributes to a sizable amount of the total transmission and distribution loss. Despite a high average e ciency of 95 to 97.5%, transformers have a signi cant environmental impact as they continuously consume power (often referred to as 2nd standby loss). Factors that Cause Accelerated Transformer AgingThe main factors responsible for transformer aging are:Temperature Oxygen Moisture Extreme operational conditions Adverse conditions in the transformers surroundings, for example, high temperature and humidity index Faults and electrical surges Degraded InsulationCopyright Paci c Crest Transformers Inc. 2007-2009 www.paci ccresttrans.com Towards a Solution 04 5. The large number of distribution transformers in use today and the fact that all electricity generated world-wide constantly passes through them implies that even a small improvement in transformer e ciency can result in a substantial savings of energy. Electricity distribution transformers have a relatively long life (estimates range from around 30 years to as much as 50 years for lightly loaded or refurbished transformers), and individual transformers accumulate substantial losses over their working life. An energy e cient transformer is therefore an important means to reduce transmission and distribution losses. Energy saving transformers can save 100 - 150 TWh/year, equivalent to more than 70 million tons of CO2 emissions. According to the DoE, phasing out transformers and upgrading old ones with new technology could result in annual energy savings worth billions of dollars. Addressing the aging power infrastructure in the US is imperative for the economy. If a transformer is over 30 years old, or there is a pressing need to consider an upgrade, switching to an energy-e cient transformer is absolutely the right thing to do.First Steps to a SolutionWhen one observes the power situation carefully, one will notice that the situation in the US has been deteriorating for some decades now. This has led various States in the US to deregulate and restructure the industry and rope in private players. The competitive generation of electricity had 4 aspects: 1. Private ownership of electricity industry facilities 2. Open access for generators to transmission facilities3. A minimum of three independently owned generating stations that could potentiallycompete for consumers within each regional electricity market or service area 4. Separation of generation from transmission and distribution During the late 1990s, energy companies borrowed about $500 billion to expand their businesses and build natural gas- red power plants. By 2003 however, the US power sector was loaded with a mountain of debt after a massive building spree during the previous ve years. The power generation industry was now struggling with an oversupply of generation such that it had depressed wholesale power prices and further weakened the nances of merchant generators. Copyright Paci c Crest Transformers Inc. 2007-2009 www.paci ccresttrans.com Towards a Solution 05 6. One such initiative from the corporate sector is from Google, who in late 2008 unveiled its plan to increase the power e ciency of their Data Centers. This would be done in two ways: Minimize electricity used by servers Reduce the energy used by the Data Center facilities For some time now, industries in the US have begun to look at renewable energy as a more stable and cheaper source of energy. Additionally, with stringent laws and regulators breathing down their necks, most see they have little choice. Some of the options they have been trying to explore for their viability are wind and solar energy. Numerous companies, for example, have chosen to cover their roofs with solar panels thus making their buildings partly if not wholly energy self-su cient. Two companies heading this initiative are United Technologies Corp. and The Lafarge Group, who are in the business of constructing green buildings. Companies are also beginning to realize that there is much investment potential in alternate energy, and venture capitalists are identifying companies (like Michigan's non-pro t alternative energy company, NextEnergy) which have tremendous potential for growth. A report from 2005 reveals that in the rst three quarters, US venture-capital rms funneled $67.7 million into the solar-energy sector, up from $31.4 million for all of 2004. While a recent report by Greentech Media Inc., released the recent quarterly data showing that venture capital investment in green technologies exceeded $2.5 billion in the fourth quarter of 2008. Solar technology attracted the highest investment at $1.3 billion.Paci c Crest Transformers: Role in Modernizing Aging Power Infrastructure in the USPaci c Crest Transformers (PCT) has over 90 years of experience in transformer manufacture. Additionally, it has been manufacturing energy-e cient, environmentally friendly transformers since the 1980s, much before going green became necessary, or even fashionable. PCTs years of deep domain experience and R&D in innovative design allows it to manufacture high-quality custom built, robust transformers for a wide variety of applications. PCT has addressed the issues where liquid- lled transformers that use mineral oil for insulation have a ected the environment and heightened re risks. PCTs standard design is far more robust and safer. PCT transformers are also well positioned to play a crucial role in the alternative power markets as their energy-e cient custom-built options can help step up or step down voltage to sub-transmission and transmission voltage levels. PCT also provides custom-built grounding transformers for wind farms. These transformers are located at the 34,500 volt collector from the turbine-based transformers. These grounding transformers are custom built by PCT.Copyright Paci c Crest Transformers Inc. 2007-2009 www.paci ccresttrans.com Towards a Solution06 7. Additionally, when given the harmonic content for an installation, PCT designs transformers to e ectively handle harmonic distortion. PCTs transformers are designed to eliminate hot spots in the insulation system thereby increasing the life of the product. PCTs standard design incorporates round coil, cruciform core construction which is far superior to rectangular coil, formed core construction. PCT can produce transformers with environmentally friendly vegetable based insulating uid which has a much higher ash point and is totally biodegradable. PCT transformers are designed and tested to operate well below the maximum thermal limit for which the paper insulation is rated. ConclusionThe aging power infrastructure in the US has been neglected for way too long, resulting in this crisis situation where the country is plagued by unreliable power supply and frequent outages. In a sluggish economy that is desperately trying to increase its pace, this only slows the process and makes growth targets so much harder to achieve. Thankfully things are changing rapidly in the energy sector, and recognition has dawned that not only is it important to replace the aging infrastructure of the country, it is also important to identify and promote reliable renewable energy options. With the impressive targets the US energy market has set for itself, one can only expect a rapid and paradigm shift in the way electricity is generated. Aiding in this process will be PCT, with its decades of understanding energy-e cient and environmentally friendly transformers. Copyright Paci c Crest Transformers Inc. 2007-2009 www.paci ccresttrans.comTowards a Solution 07