In a recent meeting with House members, John Maclaga, Assistant Director for North Carolina public power utility Wilson Energy, detailed the current supply chain challenges facing the electric power sector and offered potential solutions to alleviate those challenges.
Maclaga participated in an April 19 roundtable in Washington, D.C., convened by the bipartisan Supply Chain Caucus led by Reps. David Rouzer (R-NC), Dusty Johnson (R-SD), Colin Allred (D-TX), and Angie Craig (D-MN).
In an interview with Public Power Current, Maclaga praised the caucus members for “being a truly bipartisan group” of lawmakers who are “taking leadership on this, showing an interest in this” and seeking tangible solutions.
“The reliability and security of the electric grid is at stake if we don’t take action to address the supply chain crisis we’re seeing today,” Maclaga said in a statement related to the roundtable. “Lead times and prices for transformers, utility poles, bucket trucks, and other critical equipment have increased exponentially since the start of the pandemic, with lead times for trucks, for example, jumping from 12 to 60 months and prices increasing four-to-five fold.”
He said that Congress and regulators should make sure the federal government is supporting the development of more robust supply chains and onshoring of manufacturing of critical infrastructure components.
Specifically, Maclaga said that the Department of Energy should be encouraged to halt a proposed rule on transformer efficiency standards. In December, DOE announced it was proposing new energy efficiency standards for distribution transformers.
The proposed rule discourages the remaining U.S. grain-oriented electrical steel (GOES) steel producers and traditional transformer manufacturers from adding any GOES capacity or continuing existing capacity, he argued.
At the meeting, Maclaga noted that DOE has plans to expand electrification, promote electric vehicle use, add additional solar energy and create more energy efficient buildings. “I can’t bring these things online if I can’t connect them,” he said.
He also proposed appropriating $1 billion through the Defense Production Act to increase all forms of distribution and substation transformer manufacturing in the U.S. and directing the Federal Emergency Management Agency to invest in a national stockpile of distribution transformers when/if demand for distribution transformers falls below 2019 levels.
In late 2022, APPA, the Edison Electric Institute, and the National Rural Electric Cooperative Association submitted comments in which they said that DOE should use Defense Production Act authorities to prioritize distribution transformers, large power transformers, and other critical grid components ahead of other technologies, and it should act quickly to alleviate the most acute supply chain challenge with distribution transformers.
Maclaga said in the interview that he urged the lawmakers to “appropriate money in orders of magnitude of billions of dollars to give manufacturers a chance.”
Elaborating on the stockpile idea, he said that “another way to incentivize manufacturers to make more stuff including transformers” would be to start stockpiling equipment. “Don’t buy anything now. Find out what you want to buy, get your specs right, make the announcement. Tell manufacturers we’ve got $20 billion in a FEMA fund to go buy these transformers and when your demand and your production loads gets back to a 2019 lead time again, we’ll start buying them to build the FEMA stockpile. So then if you’re a manufacturer and you’re on the edge of buying a new production facility – maybe you can get a grant to build it – and then go ahead and wear out your three-year backlog as fast as you can and then at the other end of it, FEMA’s going to be there. If you’re first to the trough, knowing that you’ve got your demand levels down, you can be first to the FEMA transformer sale and beat your competitors to the punch.”
What Wilson Energy is Doing to Address Supply Chain Challenges
Maclaga also detailed what Wilson Energy has done to address supply chain challenges.
He said that the utility has been working with ElectriCities of North Carolina to do more joint purchasing.
The utility has been making a push for more standardization when it comes to buying transformers, making the analogy to ordering a pizza.
When a manufacturer asks “what do you want on your transformer? I want it plain with cheese...because I really just want a transformer at this point and I don’t care whether it has taps, or special locks on it or my company’s sticker. I don’t care about that stuff anymore. I just want a transformer.”
Noting that Wilson Energy is an AMI and GIS system, “we have some talented people on staff that have been using those two systems to go look at where do we have transformers that are underused or overused. In other words, transformer right sizing.”
Maclaga said that pre-pandemic, it was not economical to keep old transformers. “In other words, we got them off from some old piece of line we were rebuilding, take those fifty-year-old transformers down, we’ll take them to a scrapper and sell them.” But now, “we’re not scrapping anything unless it can’t be safely turned on.”
House Members Urge DOE to Withdraw Proposed Rule for Distribution Transformers
More than 60 House members on April 3 urged Secretary of Energy Jennifer Granholm to withdraw the proposed rule to increase conservation standards for distribution transformers.
The efficiency standards for distribution transformers proposed by DOE 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 in March.
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 in its March 27 comments to DOE regarding the NOPR.