It has been two years since the American Public Power Association took up our members’ concerns regarding the strained supply of distribution transformers, making it one of our top policy issues. We’ve held hundreds of meetings with federal officials, shared plenty of data and anecdotes showing the extent of the problem, and convened members to discuss solutions.
Utilities still have critically low stocks of transformers, and the lead times for orders are still often well over a year, if and when vendors respond to bids for orders. Yet, outside of the sector, skepticism about the problem remains. In some respects, utilities are the victims of their success on this front: Even though the supply of transformers continues to dwindle, the crisis is not seen as a problem because we continue to keep the lights on.
That doesn’t mean there isn’t hope.
Asks to Congress
We pivoted from focusing on working with the Department of Energy to taking our appeal to Congress. This change in strategy has helped bring awareness of the issue to those outside of our industry. While we don’t want to cause panic, there needs to be a broader understanding that something needs to be done, and recognition of the potential ripple effects across the country.
In August, the Government Accountability Office submitted a report to Congress, DOE Could Better Support Industry Efforts to Ensure Adequate Transformer Reserves. The report recommended that DOE develop plans to address industry supply chain challenges for transformers and other grid components, both in terms of what the agency can do to develop solutions to the crisis and how it can support utilities and industry sharing efforts.
We have also continually pushed back against proposed efficiency standards for transformers, which could make the problem worse in the short term.
Legislation has been introduced in the hopes of either adjusting or delaying the implementation of the transformer efficiency standard and to appropriate funding to increase production of distribution transformers. A problem for the latter, however, is in the uncertainty around the new efficiency standards and what kind of long-term market will exist for the components needed to create them. Manufacturers would have already needed to start changing their lines to meet the standards by the time they would go into effect, and the standards could push current domestic steel producers out of the market altogether.
As the appropriations process continues to unfold, utilities can continue to keep educating your members of congress about the real impacts of the problem — from reduced resilience after emergencies to stalled economic development.
We are also continuing to convene key players across our sector, including DOE, to inform and refine potential long-term solutions.
Part of the reassurance to manufacturers is about our ability to send market signals that show the demand for transformers will continue to remain strong for many years to come. Initial findings from a DOE study on transformer demand support this message, dispelling the notion that demand for distribution transformers is cyclical and that other market forces, from population growth to electrification, translate to strong, consistent growth in the market for years to come.
Another key area of interest is around getting to some standardization of grid components. In August, the DOE Office of Electricity hosted a webinar for public power utilities to discuss standardization opportunities (the office also hosted webinars for investor-owned utilities and cooperatives). An overarching message was how trade groups must share in the work with DOE to identify opportunities to reduce the number of possible configurations for distribution transformers and related components – which DOE calculated to be about 80,000 different configurations in use, when all options and accessories were considered. These configurations are not so easily dismissed, as they account for differences in regional climate, load density, and voltage. The webinars were an early part of an ongoing effort to identify the opportunities for transformer standardization across the utility trades and with manufacturers. The effort will continue to convene meetings with these stakeholders into 2024.
We will continue to beat the drum at the federal level to ensure there is adequate support for both short and long-term solutions – and keep hoping that the interim solutions already deployed will be enough to keep the grid reliable.