Industry Pushes Congress for $1.2B to Fix US Transformer Shortage

GE joint venture now has $30-million expansion underway of its Shreveport, La., electrical transformer manufacturing plant (left), while the world's first installed large flexible transformer now is undergoing field validation at a Cooperative Energy major substation in Columbia, Miss.

Photos courtesy of Louisiana Economic Development (left) and Cooperative Energy (right)

Transformer manufacturers and project users want Congress to make sure that $1.2 billion included in Senate-passed fiscal 2024 spending legislation to reverse a major U.S. shortage remains in the bill as funding differences with the House are being negotiated.

The money is needed to alleviate supply chain bottlenecks and support grid reliability and resilience during the transition to clean energy, seven trade groups said in a Jan. 4 letter to Senate leaders meant to encourage bipartisan cooperation.

The letter was signed by the American Public Power Association, Edison Electric Institute, GridWise Alliance, Leading Builders of America, National Association of Home Builders, National Electrical Manufacturers Association and the National Rural Electric Cooperative Association.

Funding measures are up in the air as Democrats and Republicans reached top line agreements on Jan. 7, but individual appropriations bills for agencies now must be negotiated—amid partisan differences in climate-related funding.

Karen Wayland, CEO of GridWise Alliance played down partisan opposition because transformers are fundamental to the power grid. But new sources of funding included in budgets are more vulnerable to cuts, she told ENR. “The fights are over numbers and when looking at the bottom line, $1.2 billion is a lot of extra money,” she said.

Stretched Thin

Energy research firm Wood MacKenzie said in a November 2023 analysis that only about 20% of U.S. transformer demand can be met by domestic supply—with prices up 60% to 70% on average since early 2020 and lead times for large power installations now ranging from 80 to 210 weeks. Despite a 2022 executive order from President Joe Biden to increase domestic production, funding has yet to be legislated, the firm said.

“New building and housing construction projects have been stalled and utilities are unable to modernize the grid,” the letter said. “Soaring prices and shortages of electrical distribution transformers are delaying housing projects and increasing construction costs,” Alicia Huey, chairman of the National Association of Home Builders, said.

Ben Pratt CEO of Chicago-based NovaClean Energy, noted a backlog closer to three years, he told Reuters. “We realistically can't hit the original commercial operation date we've been discussing” with buyers of power from company projects, he said.

Record demand, lack of skilled production labor and challenges acquiring various components and materials have stalled projects, the trade groups said. The spending bill provision “would boost financial assistance, procurement, technical assistance and workforce support,” their letter noted, as well as expand existing funding authority in the Infrastructure Investment and Jobs Act for transformer and grid component investment.

The transformer manufacturing industry was decimated by plants moving offshore, nonprofit public policy think tank Niskanen Center said in a 2023 report.

In response to a U.S. Government Accountability Office report last summer calling for "actionable" efforts by DOE to address transformer supply chain issues, the latter said it would have a plan developed by June 30.

The problem is set to get worse. Utilities bought 1,300 transformers in 2020, said DOE, and demand is expected to more than double that in 2027.

New Investment

Companies are already investing to help alleviate the shortages. Prolec GE, a subsidiary of the U.S. manufacturer's joint venture with Mexico-based Xignux, said in mid-December it will spend $85 million in a new factory in Monterrey, Mexico to meet North American demand for single phase pad-mount transformers. Construction is expected to begin this year with operation in 2025.

The joint venture also announced this year an estimated $29-million expansion of a plant in Shreveport, La. to build more transformers for wind and solar energy projects that will be at full capacity by June.

“I applaud Prolec GE for recognizing the business growth opportunity presented by the shift to cleaner fuel sources,” Louisiana Gov. John Bel Edwards (D) said. The expanded facility is located in the congressional district of House Speaker Mike Johnson (R-La.), who has been been a critic of added federal clean energy funding,

There also is speculation that other leading global manufacturers such as Germany-based Siemens AG could ramp up U.S. transformer capacity. "There's never been a better time to invest in critical electrical infrastructure and green mobility to support the backbone of America's economy," said Roland Busch, Siemens president and CEO, in announcing new investment last year in U.S. battery plants, semiconductor facilities and electrical vehicle charging.

Mary B. Powers has reported on engineering and construction issues in the global energy and environmental sectors for more than 30 years from Washington, D.C. and Birmingham, Ala. She formerly wrote for the Platt's group of energy sector publications under McGraw Hill and S&P Global that included Inside Energy and Megawatt Daily, and was state editor for the Lexington, Ky., Herald Leader. Mary has a master’s degree in journalism from The American University.

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