Improved efficiency distribution transformers are available for use in the industrial and commercial sectors. Existing efficiency standards cover three-phase low and medium voltage liquid and dry-type transformers.

Most of the electricity used in commercial and industrial facilities flows through distribution transformers on the customer side of the meter. Commercial buildings often have one or more low voltage distribution transformers on each floor to supply power for plug loads, lighting, HVAC, and other building systems. These distribution transformers are energized 24 hours per day, 365 days per year. Improved efficiency (Tier 1) transformers are now available from many manufacturers.

Transformer efficiency has been improved through changes in design, core or winding material selection, and in the type and amount of insulation used in the transformer. Higher grade steel in the core and more copper in the windings improve efficiency. Amorphous metal reduces core losses when compared with silicon steel. Multiple core designs have evolved that allow for powering down unneeded sections of the transformer core. The Consortium for Energy Efficiency (CEE) identified two efficiency tiers: Tier 1 yields a 35% reduction in total losses (fixed losses plus variable losses) while Tier 2 results in a roughly 50% reduction in losses compared to federal minimum standard level as the baseline.

Even small incremental improvements in transformer efficiency result in significant energy savings. CEE calculated the energy savings of Tier 1 and 2 transformers relative to baseline transformers. Savings range from 414 kWh/year for a 15 kVA Tier 1 transformer to over 21,100 kWh/year for a 1000 kVA Tier 2 unit. Getting these new improved efficiency transformers into service is difficult as transformers have an average useful life of 30 years.