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Senators Urge DOE to Reconsider Transformer Conservation Standards Proposal

The Department of Energy should reconsider its proposed rule to increase conservation standards for distribution transformers, 47 U.S. senators said in a June 1 letter to Secretary of Energy Jennifer Granholm. The bipartisan letter was led by Senator Bill Hagerty (R-TN).

On December 28, 2022, DOE announced it was proposing new energy efficiency standards for distribution transformers to improve the resiliency of the grid.

For over a year, the electric sector has been informing DOE about the severity of the supply chain challenges that have prolonged and complicated distribution transformer production and availability.

In announcing the proposed rule, DOE stated it “represents a strategic step to advance the diversification of transformer core technology, which will conserve energy and reduce costs. Almost all transformers produced under the new standard would feature amorphous steel cores, which are significantly more energy efficient than those made of traditional, grain-oriented electrical steel.”

“The availability of critical grid components remains a significant challenge for the electric power industry that could impact national security, grid reliability and resilience, as well as the ability to continue the important work of electrification and grid modernization,” the Senators wrote in their letter.

The proposed rule increases efficiency standards on distribution transformers, critical grid products, which currently are no less than 97.7% energy efficient, “at a time when the industry is struggling due to a significant increase in demand, supply chain issues, and skilled workforce shortage,” they said.

“These factors have made it hard for manufacturers to meet current demand for distribution transformers, creating challenging lead time conditions and concerns regarding grid reliability and resiliency,” the lawmakers noted.

“Further, the proposed rule has introduced uncertainty that prevents utilities from signing long-term contracts and manufacturers from making investment decisions,” the letter said.

The Senators noted that the proposed rule would require all distribution transformers to shift from the industry standard  grain-oriented electrical steel (GOES) cores to amorphous steel cores. GOES currently accounts for more than 95 percent of the domestic distribution transformer market and, therefore, manufacturers’ production lines are tooled for designs that use GOES.

“A final rule that adopts DOE’s current proposal could meaningfully worsen the current supply chain shortage by requiring manufacturers to change production lines to less readily available amorphous steel,” the Senators argued.

Currently, the United States only has one domestic producer of amorphous steel. “Moving to amorphous steel cores, as proposed by DOE, would require this sole domestic supplier to rapidly scale operations from its current market share of less than five percent to accommodate the entire distribution transformer market. Such a recalibration of the supply chain will further delay manufacturing production timelines – currently estimated to be a minimum of 18 months to two years,” the lawmakers said.

Between 2020 and 2022, average lead times to procure distribution transformers went from eight to 12 weeks to up to three years. “This multi-fold increase is directly impacting the electric power industry’s grid modernization and reliability efforts, as well as its ability to respond and recover from natural disasters, posing challenges for communities that need to rebuild as well as new development,” the Senators told Granholm.

Senators also expressed concern that requiring the use of amorphous steel for new distribution transformers could put the administration’s electrification goals at risk by exacerbating an existing grid vulnerability. “At the same time, we recognize the numerous and often underappreciated benefits of energy efficiency and support the overall goal of reducing wasteful electrical losses in our distribution grid.”

The lawmakers “believe the most prudent course of action is to let both GOES and amorphous steel cores coexist in the market, as they do today without government mandates, for new installations as we ramp up domestic production and reorient supply chains.”

They urged the DOE “to refrain from promulgating a final rule that will exacerbate transformer shortages at this strategically inopportune time. Such a standard could come at meaningful cost to grid reliability and national security, continuing the clean energy transition, and bolstering domestic supply chains and the workforce.”

Instead, they urged the Department to finalize a rule “that does not exacerbate the shortage in distribution transformers and convene stakeholders across the supply chain to develop consensus-based approach to setting new standards.”

Senators have also asked for a briefing “with your office on the path forward on DOE’s proposal, as well as how to best leverage existing DOE authority to bolster domestic supply chains and help alleviate the current and persisting supply chain challenges facing distribution transformers.”