The U.S. has a 'critical' shortage of power transformers. Can it bounce back?

A new report from the National Infrastructure Advisory Council (NIAC) examines the current state of the power transformer shortage in the U.S., and makes several recommendations for how to potentially overcome the obstacle.

The U.S. is in the middle of an unprecedented imbalance between supply and demand for power transformers, which has left the energy sector anxious and uncertain about the stability of the future grid.

To address this shortage, a new report from the National Infrastructure Advisory Council (NIAC) examines the current state of the power transformer shortage in the U.S., and makes several recommendations for how to potentially overcome the obstacle.

The report, Addressing the Critical Shortage of Power Transformers to Ensure Reliability of the U.S. Grid, notes that the transformer manufacturing industry experienced “severe” supply chain issues during the COVID-19 pandemic, and the impacts of those disruptions are becoming amplified. An electric utility or generator may have to wait between 2 to 4 years for a new transformer to be delivered, compared to a few months as recently as 2020. In an extreme case, one large power transformer manufacturing facility in the U.S. revealed a 5-year wait time for new transformer orders.

With supply stretched this thin, something needs to change, according to a recent report from the National Renewable Energy Laboratory (NREL). NREL estimates distribution transformer supply may need to increase 160%–260% by 2050 compared to 2021 levels to meet residential, commercial, industrial, and transportation energy demands. NREL says the demand increase is largely driven by aging transformers and electrification.

The rising demand for transformers is driven by increasing electrification around the world, growing renewable energy generation, and growth in large-load customers like data centers, the report said, This has also led to sharp price increases that could have a ripple effect on electricity costs for business and residential customers.

In addition to increasing demand, the domestic transformer manufacturing industry has had trouble attracting and retaining qualified workers, NIAC said in the report. Additionally, automation, assembly optimization initiatives, and other mass production technologies have not made transformer production much more efficient, as there is a lack of standardization in transformer design.

“The previous cyclical nature of the industry has made manufacturers wary of increasing capacity despite rising demand, even as it became evident that the recent transformer shortage was not merely the product of a normal cycle,” the report reads.

NIAC provided several recommendations in the report meant to shorten the gap. It argued that increasing domestic production of transformers and critical components is the best option from a national security perspective. Slightly riskier options would involve near-shoring some production to Canada and Mexico, or friend-shoring production overseas and transporting them via merchant vessels.

The report made the following recommendations:

Read the full report here.