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Proposed Efficiency Standards for Distribution Transformers Would Worsen Shortages: APPA

Efficiency standards for distribution transformers proposed by the Department of Energy would worsen current distribution transformer supply shortages and, to the extent that they are even feasible, would impose significant costs on consumers, the American Public Power Association said.

The March 27 comments filed by APPA come in response to a DOE notice of proposed rulemaking on Energy Conservation Standards for Distribution Transformers issued late last year. If the rulemaking is adopted, almost all transformers produced under the new standard would feature amorphous steel cores.

“As a threshold matter, the NOPR’s proposal to tighten distribution transformer efficiency standards comes at an extremely precarious time for electric utilities and their transformer suppliers,” APPA said.

The electric industry is currently experiencing a critical shortage of distribution transformers, “and the efficiency standards included in the NOPR would likely exacerbate a supply shortfall that has already reached crisis levels, threatening electric reliability, economic development, and the ongoing transition to lower-emitting generating resources,” APPA argued.

“It is difficult to overstate the concerns of APPA members and other electric utilities about the current transformer shortage,” it said,

DOE’s analysis of the proposed standards “must account for the effects that the revised standards would have on suppliers’ ability to meet industry demands, and DOE should also consider the impact of the NOPR on near-term supply chain constraints. These considerations alone warrant reconsideration of the proposal to revise distribution transformer efficiency standards at this time.”

Even if DOE was to conclude that the distribution transformer supply chain crisis does not provide grounds to forego prescribing new efficiency standards at this time, the NOPR has not adequately supported a finding that the proposed standards would be technologically feasible and economically justified, as required by the Energy Policy and Conservation Act, the trade group said.

APPA said the NOPR fails to address  several very significant costs and technical challenges that the revised efficiency standards would impose on distribution transformer suppliers, electric utilities, and/or electric consumers. “Indeed, the number and variety of important issues on which DOE seeks comments tend to show the highly provisional nature of the NOPR’s conclusions.”

APPA Survey

APPA noted that it conducted a survey of public power utilities in February and March 2022 on disruptions to the utility supply chain. One hundred twenty-one public power utilities responded to the survey, with 114 answering all questions. When asked to indicate which supply chain disruptions were most concerning to their utilities, 103 out of 121 respondents ranked transformers as their highest concern. An additional 13 ranked transformers as their second-highest concern.

Evaluating the survey data individually, and assuming no changes to the current conditions, 19 out of 91 utility respondents, or 21 percent will run out of new transformers within the quoted 12-month lead time for transformer shipments. Most of these utilities are larger public power utilities.

Contingencies public power utilities have used to address the transformer shortage include refurbishing their own transformers, purchasing transformers from other utilities (where possible), or harvesting unused transformers already installed in their systems, APPA said.

APPA Questions Assumptions Underlying NOPR’s Technical and Economic Analyses

DOE preliminarily concludes that the distribution transformer efficiency standards proposed in the NOPR are technologically feasible and economically justified.

“While APPA recognizes the complexity of performing the relevant technical and economic analysis to determine if the proposed efficiency standards satisfy EPCA’s statutory standards, APPA respectfully submits that certain of the assumptions underlying the NOPR’s technical and economic analyses are not adequately supported and/or overlook important considerations that are material to the conclusions.”

The NOPR’s assumptions about transformer availability and cost are not adequately supported. The use of more accurate industry data would shows the lack of  economic justification for the proposed revised standards, APPA said, noting that transformer lead times and prices continue to increase.

Supply Chain Constraints May Negatively Impact Reliability

Transformer lead time delays make it more difficult to connect electric vehicle supply equipment and interconnect renewables, potentially inhibiting utilities’ ability to transition to lower- and non-emitting resources, APPA said.

It noted that the North American Electric Reliability Corporation has highlighted the reliability risk associated with the transformer shortage, noting in its most recent Winter Reliability Assessment, that “[i]nadequate supply of distribution transformers could slow restoration efforts following winter storms.”

These supply chain issues are directly harming consumers, the association said. “Transformer unavailability has led to delays in housing construction, forcing thousands of new-home buyers to wait as work is halted on new home construction for months at a time. Among public power utilities, one in five projects were deferred or canceled.”

APPA urges DOE to Reconsider NOPR

APPA urged DOE to reconsider the NOPR or delay the implementation until the transformer supply base is strengthened enough to increase supply, reduce costs, and greater diversity of component suppliers exists.

APPA also said that DOE should rework the cost-benefit case with the realistic numbers included in all responses to the NOPR.