DOE Should Avoid Making A Grid Supply Chain Crisis Worse

Most Americans haven’t been impacted by a shortage of electric transformers that has been building for two years now, but with hurricane season kicking off this month, they soon could be. Some in congress, including Mississippi Sen. Cindy Hyde-Smith, are becoming concerned, not just about the shortage, but efforts by regulators in the Biden administration that they believe could make the problem worse.

“I’ve heard from all my local power companies in Mississippi and they are ringing me up, “ Sen. Hyde-Smith told Energy Secretary Jennifer Granholm during a recent Senate Energy and Natural Resources Committee hearing. “I’ve read the key findings from the Tiger Team about serious problems with the supply chain shortages threatening our region’s electric infrastructure, including skyrocketing costs, and long lead times of up to two to four years, and more.”

Referring to a new proposed regulation by the Department of Energy that seeks to implement stricter efficiency standards in the midst of the supply crisis, Hyde-Smith told Granholm, “It seems to me, the White House and your department have put the cart before the horse with these new efficiency standards versus meeting current demand, supporting positive investment in the electric grid, and providing critical services to citizens,” she said.

The power industry is also concerned about the issue. During a pair of recent interviews, leaders from two of the industry’s major trade associations pointedly voiced their own views on the matter.

“Across the board, our members are experiencing severe supply chain constraints. We’re not able to get distribution transformers, and we’ve been sounding the alarm with the federal government because hurricane season is around the corner,” says Adrienne Lotto, Senior Vice President of Grid Security at the American Public Power Association (APPA). “[APPA members] are very concerned about having supplies on hand should a hurricane come or should there be an event, to be able to respond and repair and restore the grid as quickly as possible. The supplies are dwindling and we’re seeing a longer and longer time in terms of getting our orders fulfilled.”

Todd Snitchler, President of the Electric Power Supply Association (EPSA), agrees that the biggest point of concern centers around larger, distribution transformers. “The timelines I have heard for the smaller transformers are up to two years, and for the large transformers that can be up to five years,” he says. “I mean, that’s if you have a significant weather event or you have a significant outage, or if you have damage like we saw in North Carolina late last year or in Washington State or Oregon after that. That’s a flashing red light about the need for us to make sure that we are thinking about the complete energy value chain, which includes the transformers and some of the system requirements that can be damaged either through weather or through human action, vandalism, criminal activity, what have you.”

Tighter efficiency standards like the ones proposed by DOE are not any sort of bad thing when viewed in a vacuum. But when viewed from a cost-benefit perspective, especially during a time when the supplies and supply chains are already in a crisis situation, this particular effort by DOE seems ill-advised. During the Senate hearing, Hyde-Smith pointed to an analysis published by the National Electric Manufacturers Association which finds that the proposed regulation would result in a net efficiency gain of just .02 percent, a virtual rounding error.

Lotto also noted that other aspects of the Biden climate suite of regulations have already contributed to the shortage of steel and other materials that go into the manufacture of the transformers. “The federal government policies around things like EVs and electrification, there is some evidence that the steel, rather than going to things like distribution transformers, is now being utilized more towards the electrification front due to some of the federal policies that are coming out now,” she says. “We started raising this issue back in 2022 and were hoping the supply chains would improve in 2023; but thus far, that hasn’t been the case.”

Bottom Line

For Snitchler, the bottom line is the impact policies and the growing transformer supply crisis could have on grid reliability. “I like to say that there’s three things that Americans want: They want lights on, beer cold and water warm, and that’s non-negotiable for American society. So I don’t think the public is going to be willing to have anything less than near-perfect reliability.”

The public might have to settle for less than the “near-perfect reliability” Snitchler talks about as the U.S. goes through this year’s hurricane season, regardless of any further policy actions by the Biden administration. At the very least, however, it would seem the wisest course of action for Granholm and her staff at DOE would be to do their best to avoid making the situation worse at the most inopportune possible time.