Electricity Markets

APPA Survey of Members Shows Distribution Transformer Production Not Meeting Demand

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An American Public Power Association (APPA) survey of its members shows that production of distribution transformers is not meeting current demand, “as evident in the significantly growing lead times, lack of stock in yards and the high number of project deferrals,” APPA said.

In August 2022, APPA surveyed its members about distribution transformer supply and demand. The survey “highlights the expanded nature of this problem subsequent to the results of two previous surveys we have done on this matter, beginning in November 2021,” APPA said.

The data from the survey informed the Department of Energy and the Electric Subsector Coordinating Council (ESCC) of the severity of the supply chain distribution transformer shortage across the entire electric sector.

Ninety-five public power utilities serving a total of 6,719,596 meters responded to the survey.

Along with its finding that production is not meeting current demand, another key takeaway from the survey is that demand has grown consistently in the past and will continue to rise in the future.

 Because demand is out pacing supply, many public power utilities are at a high risk of stocking out on transformers in 2022 or following one storm.

Between 2019 and 2020, demand across all voltage classes for distribution transformers rose 3.6% for public power survey respondents. During this period, the lead time to procure distribution transformers averaged two to three months. Economic forecasts anticipate that the calculated annual growth rate for distribution transformers in North America will continue to increase and  be 9.1% for 2022-2030.

Between 2020 and 2022, the number of distribution transformers purchased remained largely steady. However, beginning in 2021 and continuing into 2022, the number of distribution transformers available for purchase no longer meets the demand. Evidence for this imbalance can be seen in the significantly increasing lead times and the deferral of projects, APPA stated.

Meanwhile, between 2020 and 2022, average lead times to procure distribution transformers for all voltage classes rose 429% for public power respondents -- from about two to three months pre-2021 to about 12 months in 2022. Some utilities reported being quoted lead times of more than three years.

APPA reported that many utilities are deferring or canceling infrastructure projects because they are unable to procure the additional distribution transformers required for these projects. Among public power utilities, one in five projects were deferred or canceled.

Most responding utilities reported low or near zero emergency stock, which is often used to recover post-disaster or to do infrastructure maintenance. Some public power utilities reported being within weeks of hitting the bottom of their distribution transformer stocks. In the event of a catastrophic hurricane or other natural disaster, the industry risks stocking out much sooner, APPA pointed out.

APPA continues to work through the ESCC and other forums to discuss the problems and identify solutions that the federal government can act upon to alleviate the supply chain shortages, specifically with regards to distribution transformers.

APPA has taken a number of actions to address ongoing supply chain challenges. APPA recently rolled out an additional feature to its eReliability Tracker that is available to all public power utilities and allows for voluntary equipment sharing by matching systems with the same distribution voltages. APPA also recently finalized a new supply chain issue brief. APPA members can download the issue brief here.

In May, APPA sent a letter to Secretary Granholm at the Department of Energy asking that they consider a temporary waiver of efficiency standards in distribution transformers that may lead to an increase in supply.  That request was declined in August.  In a speech in June at APPA’s National Conference in Nashville, Tenn., APPA President and CEO Joy Ditto urged member utilities to share their supply chain challenges with APPA so that the trade group can relay details on these challenges to federal partners and discuss how critical burdens on the sector can be alleviated.

In May, APPA convened a supply chain summit that included participation from public power utility officials who discussed their supply chain challenges and mitigation strategies.