Supply chain issues, among other factors, have already compounded a general shortage of distribution transformers. In late November, several trade groups implored the DOE to prioritize Defense Production Act (DPA) authority from the Inflation Reduction Act (IRA) for transformers. Supply issues have prompted many utilities to defer or cancel infrastructure projects because they are unable to procure the additional distribution transformers required for these projects, they said “Among public power utilities, one in five projects were deferred or canceled,” said the American Public Power Association (APPA).
On Dec. 20, APPA lamented that the $1 billion of funding trade groups had requested to ramp up production of distribution transformers through the Defense Production Act was not included in the Dec. 19 omnibus appropriations bill. “This is a critical issue that several industries have raised, and on which the President has called for action. Despite our collective pleas over the past year to address this issue, supplies continue to dwindle, demand far outpaces production, and if action is not taken in the near term, the U.S. will face electric reliability concerns,” said APPA President and CEO Joy Ditto.
The North American Electric Reliability Corp. (NERC), in its latest Winter Reliability Assessment, meanwhile, highlighted reliability concerns stemming from an inadequate supply of distribution transformers. The nation’s designated Electric Reliability Organization (ERO) said that the electricity industry is facing a shortage of distribution transformers “as a result of production not keeping pace with demand.”
At the same time, several distribution transformer manufacturers have voiced growing concerns about competition for steel supplies. Schneider Electric, in recent comments to the DOE, said that power transformers and medium-voltage distribution transformers tend to be prioritized over the needs of the LVDT market and therefore supply issues can exist if LVDT manufacturers need to purchase the same core steel as medium-voltage distribution transformers. Powersmiths, another manufacturer, in comments said the company is experiencing diminished availability of several grades of steel and increased costs. The company suggested steel suppliers are shifting to serving the electric vehicle market “without plans to bring transformer-grade steel capacity back.”
“In June, President Biden invoked the Defense Production Act to accelerate the domestic production of clean energy technologies, including distribution transformers and grid components. In October, DOE issued a Request for Information to gather additional public input to determine how to maximize the impact of these new authorities. The comment period closed on Nov. 30, and DOE is carefully considering the information submitted,” it said.