Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.
Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world. Intelligent Servo Transformer
The Biden administration is still grappling with short supplies of ubiquitous equipment needed to distribute power to where it’s needed, even after the president tapped an emergency wartime law to complement energy incentives in an effort to boost production.
Long lead times for distribution transformers have emerged in recent months as a bottleneck that threatens progress toward meeting climate goals and upgrading the country’s power grid, industry leaders and energy officials said.
The delays persist more than one year after President Joe Biden invoked the Defense Production Act to mobilize federal agency resources to support distribution transformers and other electric grid components.
Officials at the departments of Energy and Labor say they are working to assess ways to expand US production capacity, but warn the problem is rooted in a systemic workforce shortage and supply chain issues that will be difficult to quickly fix. A lack of funding from Congress also limits what the agencies can do.
Electric utilities and manufacturers have been pressing the Biden administration and Congress to do more to support power grid components—and recognize incentives are needed for grid components that are commensurate with those available for solar, wind, and electric vehicles.
“I just think the cart got ahead of the horse,” said Buddy Hasten, president and CEO of the Arkansas Electric Cooperative Corporation who chairs a public-private working group formed in June 2022 to analyze supply chain shortages.
“If we electrify everything, then everything relies on that, we’re going to be putting all of our eggs in the electrical basket,” Hasten added. “And yet we don’t even manufacture the most important devices needed to get that electricity from the East Coast to the Midwest to all over the grid.”
Electric utilities started reporting shortages to the Energy Department about a year and a half ago as the Covid-19 pandemic disrupted supply chains, Bridget Bartol, deputy chief of staff at the Energy Department, said in an interview.
The department heard from the Electricity Subsector Coordinating Council, a group of power sector CEOs that serves as a liaison to the federal government, that wait times for distribution transformers were growing from as short as two months to as long as more than two years.
Transformers, which change the voltage of electricity so it can be consumed by homes, businesses, and industrial facilities, are produced by more than a half-dozen US factories. But quickly expanding production faced head winds, the agency found after surveying manufacturers.
For one, volatile commodity markets for copper and aluminum, as well as limited access to specific types of steel made predominantly in Asia, were slowing expansion.
But perhaps the biggest wild card was the availability of skilled labor for factories: Adding more shifts and expanding head count could increase distribution transformer production by as much as 25% or more, manufacturers told the DOE, according to the agency.
“While we thought it was just material dynamics and potential supply and demand imbalance in their supply chain to make a transformer—actually, it was workforce,” Bartol said. “They’re seeing significant workforce and retention problems in their existing manufacturing facilities.”
The rollout of electric vehicles and expansion of the power grid to decarbonize industry—spurred by the 2021 infrastructure bill and climate law of 2022—provides an enormous opportunity to invest in the US, power grid component manufacturers said in interviews.
Capital spending on the distribution grid by investor-owned utilities in 2022 was 20% above the 2020 level, according to the Edison Electric Institute, a trade association of investor-owned electric utilities.
GE Vernova said it’s committed to meeting the growing demand for power from transformer facilities in Wisconsin, North Carolina, and Louisiana, adding 153 jobs with a $28.5 million investment to expand capacity in the latter plant.
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