APPA’s Waterhouse Underscores Threat to Reliability With Transformer Supply Chain Challenges

Desmarie Waterhouse, Senior Vice President of Advocacy and Communications and General Counsel at the American Public Power Association, on Jan. 26 underscored the ongoing threat to grid reliability due to ongoing distribution transformer supply chain challenges.

She made her comments at the U.S. Energy Association’s 19th Annual State of the Energy Industry Forum in Washington, D.C.

“There has been a significant supply chain problem for distribution transformers,” Waterhouse said, noting that most distribution transformers are made in the U.S.

“We have been hearing now from our members for over a year about their very serious concerns that they’re going to run out of their stocks of distribution transformers. It used to typically take about three months from when you would place an order for transformers to when you’d get them delivered and now it’s well over a year,” she said.

In addition, “we’ve got members that are being told by manufacturers – we can’t even meet your order, or we don’t even know when we’ll have it ready for you – and that’s a pretty significant concern,” Waterhouse said.

“There’s been a lot of talk about reliability of the electric system – well, this is going to have an impact on reliability for distribution utilities,” she added.

“We had a major hurricane last year. Fortunately, there weren’t other hurricanes, but I’ve talked to my members in Florida pretty extensively” and those utilities are “incredibly concerned. Obviously, we’re still in the winter. There could be additional winter storms.”

APPA member utilities have told the association that they are very worried that they will not have the transformers that they need if there is a storm or some other event.

“I’ve also heard from my members that are in parts of the country where there’s a lot of growth, particularly in areas where there’s a big demand for housing,” she said. Those utilities are having to “go back to those who are constructing homes and other facilities that those projects are going to have to be delayed for pretty extensive periods of time because they can’t get access to the distribution transformers that they need.”

APPA has been working collaboratively with the Edison Electric Institute, the National Rural Electric Cooperative Association and the Department of Energy “trying to talk through what can be done.”

President Biden previously announced plans to use the Defense Production Act and one of the particular items listed was distribution transformers “but so far there hasn’t been any concrete action taken by the administration under the DPA to do anything in this space,” Waterhouse said.

“We’re just one storm away for this potentially being a problem,” she said.

APPA is disappointed that the DOE in late December put forth a proposal to increase the energy efficiency standards for distribution transformers, Waterhouse said.

This is not “really the right time to do that. We already have an issue with supply and looking to increase those efficiency standards isn’t sending the right signal to the manufacturers about them ramping up production if what’s going to happen from that energy efficiency standard would actually change that production process considerably.”

Inflation Reduction Act Provision is a “Game Changer”

The Inflation Reduction Act, “for the first time, public power utilities are going to get access to various energy tax credits, and this is through the direct pay provisions of the IRA,” Waterhouse told the attendees at the event.

“I can’t stress enough for you what a game changer this is for our members,” she said. “We have not been able to have access to the production tax credit or the investment tax credit because our members are not-for-profit,” which has forced APPA members “that want to make investments in non-hydropower renewables to enter into power purchase agreements and they might only get a small portion of that tax credit passed through to them,” which makes those investments more expensive.

With respect to the IRA, Waterhouse said that APPA is keeping a close watch on how fast the U.S. Treasury Department will implement its guidance related to the law.

“What we really want from Treasury is for them to make this process as easy and simple as possible for our members,” she said.

Waterhouse also noted that for APPA members that decide not to make a direct renewable energy investment but choose instead to go with a power purchase agreement, direct pay will give them the ability to “get a better deal if they do want to do a power purchase agreement.”

As for the Infrastructure Investment and Jobs Act, “We were particularly pleased when that was enacted into law,” Waterhouse said, noting that “there are a lot of funding opportunities in this law that are really going to benefit our members. These include the provisions for cybersecurity, grid resiliency, broadband, electric vehicle and hydrogen vehicle infrastructure, energy efficiency and” Department of Energy research, development and deployment of energy technologies.

Permitting Reform

Waterhouse also said that APPA supports common sense reforms to the energy permitting process, which includes getting needed pipeline infrastructure built for natural gas and electric transmission lines.

There is also a need for hydropower facility licensing and relicensing reform, she said, noting that a number of public power utilities receive generation supplies from hydropower. The permitting process for hydropower facilities “has been cumbersome,” she said.

Waterhouse said that APPA is hopeful that because Rep. Cathy McMorris Rodgers (R-WA) is now Chairman of the House Energy and Commerce Committee, there is a chance that something meaningful could be done with respect to licensing and relicensing reform.

The lawmaker has sponsored legislation in the past that would streamline hydropower relicensing processes in the U.S.