The global
transformer market has been plagued by transformer shortages and high prices
for a few years now and the problem is set to continue as rising power demand calls
for more of them. The DOE’s National Renewable Energy Laboratory (NREL) issued
a report in 2024 that detailed the problem:
“Distribution transformers, used to step-down medium level
voltage to service-level voltage for end-use electrical consumption, are
currently experiencing an unprecedented imbalance between supply and demand.
Utilities are experiencing extended lead times for transformers of up to 2
years (a fourfold increase on pre-2022 lead times), and reporting price
increases by as much as 4–9 times in the past 3 years [1-3]. Current shortages
have been attributed to pent-up post-pandemic demand; difficulty recruiting,
training, and retaining a skilled workforce; component supply chain challenges;
and materials shortages (grain-oriented electrical steel, aluminum, and
copper). The supply of transformers is critical for the reliability and growth
of the power system.”
Demand increases due to electrification, renewable energy
growth, AI data centers, aging infrastructure, effects of extreme weather
events, and utility investments to improve reliability and resiliency are the
main culprits stressing the supply chain. Utilities own most transformers, but
industrial power customers own about 20% of them in the U.S.
“Reports from the last major study of national inventory
in 1994 estimated the stock at more than 50 million transformers (for both
utility and privately owned transformers) with more than 2.3 TW of
utility-owned installed capacity [4]. Initial NREL estimates for current stock
range from 60 to 80 million transformers with upwards of 3 TW of installed capacity.”
The typical life
expectancy for distribution transformers is 40-45 years. Many now in operation
are already in that age range. Transformers that are often overloaded, which they
can accommodate for short periods, will often have shorter lifespans. In any
case, the need to replace aging transformers is putting a lot of stress on supply.
Extreme weather
events have also been a major factor. Con Edison lost 900 distribution transformers
during 2012’s Hurricane Sandy. Other hurricanes destroyed or damaged thousands
of transformers. After Hurricane Laura in 2020, Entergy identified 4,760
damaged transformers, and after Hurricane Ida in 2021 nearly 6,000 transformers were damaged in Entergy’s service territory. Over 15,000 were damaged in 2005’s
Hurricanes Katrina and Rita. Many were lost in last year’s Hurricane Helene as
well. Storms and floods can damage them beyond repair. Many were sent to
Ukraine to replace repeatedly targeted energy infrastructure by Russia, seeking
to demoralize the population by depriving them of power and heat. I have read comments
complaining that the shortage during Helene was due to them being sent to
Ukraine, but I doubt that was a big factor. Extreme heat can contribute to transformer
damage by making them run in overload. Wildfires and lightning strikes can also
damage them. Although the damage from storms represents about 1% of
transformers, that 1% is still a lot of them. NREL developed a transformer
demand model, which is shown below.
Utilities add
transformers for two reasons: 1) to replace aging or failing transformers,
and 2) to add new transformer capacity to shore up power reliability and
resiliency, which can require some redundancy.
Transformers are
also getting larger as power demand increases. The new default minimum size is 25
kVA, which used to be 10-15kVA. Pole-mounted transformers are declining
relative to pad-mounted transformers as utilities increase their resiliency which
includes more buried lines, especially where storms and wildfires are
prevalent. NREL notes that PG&E has a major program to invest in burying
10,000 miles of their network (approximately 10% of their system) by 2026.
“For specific service territories where the risk of
utility equipment starting wildfires is expected to increase, we expect
increased demand for dry-type transformers as replacement for oil-filled
pole-mount transformers. For flood resiliency, demand will increase for submersible
transformers, transformers with less corrosive steel, and corrosion-resistant
paint.”
Step-up
transformers for wind and solar are of similar voltage and capacities to distribution
transformers. They are used to convert low-voltage electrical generation into
high-voltage electricity for long-distance transmission. Transformers are also
used in EV charging stations.
“The type of transformers utilities will require is
expected to change; demand for larger transformer sizes is expected to increase
due to electrification. Enhanced reliability and resilience will increase the
demand for pad mount, dry-type, and submersible transformers. Lastly, step-up transformer
demand is expected to substantially grow due to large build-out of renewable
power production capacity— this will put increased pressure on transformer
manufacturing.”
According to an
article in Power Magazine by Sonam Patel
“…a particular issue is that, owing to periods of boom
and bust between the 1980s and 2000s, the transformer industry has morphed into
a “smaller group of manufacturers.”
She also notes that in 2019 about 80% of large power
transformers (LPTs) were imported. This is due to the inability of domestic
manufacturers to compete with countries with lower labor costs. In June 2022
Biden invoked the Defense Production Act to increase domestic transformer
production. Even so, it was deemed unlikely to have much of an effect due to
high start-up costs. She notes in her June 2024 article:
“In February, Siemens Energy announced it would invest
$150 million to expand operations at a transformer factory in Charlotte, North
Carolina, to produce 57 LPTs per year with a capacity of 15,000 MVA by the end
of 2026. And, in April, Hitachi Energy revealed investments of more than $1.5
billion to ramp up its global transformer manufacturing capacity by 2027
(Figure 3). The investments include a new “state-of-the-art transformer
factory” in the Vaasa region of Finland, along with expansions to facilities in
Virginia and Missouri, Germany, Colombia, China, Vietnam, and Australia. These
measures follow crucial announcements by transformer heavyweights like Virginia
Transformers, which in 2023 opened a new facility in Mexico capable of
producing transformers up to 100 MVA.”
What is a Transformer, What Does it Do, and What Are
Some New Designs?
According to an article
in IEEE Spectrum, a transformer is basically a simple device that:
“…has a two-sided core made of iron or steel with copper
wire wrapped around each side. The sets of wires, called windings, aren’t
connected, but through electromagnetic induction across the core, current
transfers from one coil to the other. By changing the number of times the wire
wraps around each side of the core, engineers can change the voltage that
emerges from the device so that it is higher or lower than what entered.”
Large power transformers (LPTs) that step up the voltage to
thousands of volts from large power plants to power transmission lines can be
massive in size. When that power gets closer to where it will be used step-down
transformers are employed. Distribution transformers that further step down the
voltage are much smaller and deal with much smaller voltages.
Below is an
explanation from Sonam Patel's article in Power magazine about how transformers
work.
A team at the Georgia
Tech Center for Distributed Energy has been working on a solid-state
transformer design that can convert AC to DC without additional components,
which would enable cheaper transmission of renewable power. They call their design:
“…a modular controllable transformer (MCT). It uses
semiconductors and active electronic components to not only transform
electricity to other voltages but also invert the current between DC and AC in
a single stage. It’s also built with novel insulations and other measures to
protect it from lightning strikes and power surges.”
New types of ‘power-electronic’
transformers are also being explored. At Oak Ridge National Laboratory in Tennessee,
they are being pursued. They are experimenting with using different materials for
insulation and heat resistance as well as ways to reduce the amount of steel
required and the use of 3D printed hollow cores utilizing additive
manufacturing.
According to IEEE
Spectrum:
“Adding power electronics could enable transformers to
manage power flow in ways that conventional ones cannot, which could in turn
aid in adding more solar and wind power. It could also enable transformers to
put information into action, such as instantaneously responding to an outage or
failure on the grid. Such advanced transformers aren’t the right solution
everywhere but using them in key places will help add more loads to the grid.”
Power-electronic transformers could be a boon for solar
energy developers by simplifying voltage regulation from solar farms to
transmission lines.
As noted, many transformers
are customized for specific applications. If there was more standardization,
then manufacturing would not have to be tweaked for each specific project and
this could result in faster output. This is especially true for LPTs. GE
Vernova Advanced Research (GEVAR) has been developing a conventional
transformer, a flexible LPT, with the capability to change its impedance, or resistance to electricity flow, without changing any other feature in the
transformer, including its voltage ratio. This design could also help relieve
problems with grid integration of intermittent wind and solar generation.
The manufacturing constraints have created issues for
utilities where they must do their upgrades based not on what they ideally need
in transformer size and type, but on what transformers are available.
Rystad Energy has estimated we’ll be seeing this problem
until Q4 of 2026. Recommendations from a June 2024 report by the National Infrastructure
Advisory Council are as follows:
1. Craft Federal policies and designate funding targeted
at increasing domestic capacity, such as tax credits, grants, accelerated
depreciation, funding for new apprentice or training programs, and other
incentives, using the Crafting Helpful Incentives to Produce Semiconductors
(CHIPS) and Science Act as a model.
2. Achieve greater accuracy in transformer-demand
forecasting that provides a more comprehensive outlook across the next 10 to 15
years by convening all parties who drive demand.
3. Encourage long-term contracts/customer commitments
between transformer suppliers and the industry sectors driving demand and
establish favorable regulatory frameworks to enable them.
4. Establish a strategic virtual reserve of transformers,
with the U.S. government as the buyer of last resort.
5. Promote collaboration between design engineers from
utilities, engineering firms, trade associations, and domestic and foreign
manufacturers to standardize transformer design, reduce complexity associated
with customization, and facilitate interoperability through standardized interfaces
between transformers and other grid components.
6. Ensure a sufficient supply of electrical steel by
coordinating incentives for new domestic supply, governmental efficiency
standards, and trade policy.
7. Grow the pipeline of qualified workers by partnering
with universities, community colleges, and trade schools on training programs,
while working with Federal, state, and local governments to craft tax
incentives for workers who enter the field.
Wood MacKenzie
reported in a 2024 report that:
“Transformer lead times have been increasing for the last 2
years - from around 50 weeks in 2021, to 120 weeks on average in 2024.”
“Large transformers, both substation power, and generator
step-up (GSU) transformers, have lead times ranging from 80 to 210 weeks, and
some manufacturers have already announced plans to expand capacity to meet
growing demand.”
That is up to 4 years' wait for the large transformers. In
addition to that prices for grain-oriented steel have doubled. This is due to a
miscalculation during the pandemic when it appeared that demand for
transformers would drop. The opposite has occurred and the manufacturers who
have curtailed production have been struggling to increase it again. As Wood
Mac reported:
“Transformer prices have risen 60% to 80% on average since
January 2020. Commodity prices for raw materials such as Grain Oriented
Electrical Steel (GOES) have doubled since January 2020, while copper prices
have increased approximately 50% over the same time frame.”
“During the pandemic, manufacturers expected a drop in
demand for transformers, and production for these commodities slowed down. As a
result, manufacturers are now struggling to ramp up production levels to meet
global demand.”
“GOES prices have surged by almost 100% since January
2020, driven by a significant market deficit and key manufacturers curtailing
production. Prices have eased slightly since peaking in Q4 2023, but the market
is expected to remain volatile moving forward amid capacity constraints and
growing demand.”
The transformer
shortage is also a big factor among several factors that are delaying
interconnection times for wind and solar projects. Some developers were savvy
enough to order transformers ahead of time. An article in IEEE Spectrum notes
that power designers are planning for future standardization of transformers
with new materials and capabilities:
“For power engineers, this crisis is also an opportunity.
They’re now reworking transformer designs to use different or less sought-after
materials, to last longer, to include power electronics that allow the easy
conversion between AC and DC, and to be more standardized and less customized
than the transformers of today. Their innovations could make this critical
piece of infrastructure not only more resistant to supply chain weaknesses, but
also better suited to the power grids of the future.”
In March 2025 a
major global manufacturer of transformers, Hitachi Energy, announced a plan to
invest $250 million in transformer component manufacturing with 40% to be spent
in the U.S. at facilities in Virginia, Missouri, and Mississippi. This is part
of a $6 billion investment to expand manufacturing at the company, with $1.5
billion earmarked to scale up global transformer manufacturing. Power
management company Eaton announced in February that it will invest $340 million
to increase U.S. production of its three-phase transformers at a facility in
South Carolina with hiring and production to commence in 2027.
Below is an overview
by Sonam Patel of Power Magazine of some of the new transformer designs and
innovations that will increase capabilities, efficiency, and resilience.
The Transformer Efficiency Rule and the Slowing of the
Switch to Amorphous Steel Cores
In January 2024 a
bipartisan group of Senators introduced legislation to block a proposed Biden
rule to increase transformer efficiency, arguing that it would be too costly
and further increase already long wait times for distribution transformers. Utility
Dive explained then:
“Most distribution transformers are made with
grain-oriented electrical steel, or GOES, but DOE’s proposed rule would
essentially transition the electric industry to using amorphous steel cores.
There is only one domestic manufacturer of each type of steel, however.”
“By effectively forcing the distribution transformer
industry to change the type of steel it uses almost overnight, [the] Department
of Energy’s rule would actually jeopardize electricity distribution for
millions of Texans and Americans, with potentially disastrous results during
extreme weather,” Sen. Ted Cruz, R-Texas, said in a statement.
The final rule, according to the DOE, adopted in April 2024
“…includes a longer compliance timeline of five
years—will save American utilities and commercial and industrial entities $824
million per year in electricity costs, and result in more demand for core
materials like grain-oriented electrical steel (GOES). Following a proposed
rule issued last year, DOE adjusted these final standards based on extensive
stakeholder engagement to ensure continued growth opportunities for domestic
steel production and provide a longer compliance timeframe of five years.”
“The updated final standards can primarily be met with
GOES, the majority of which will be manufactured in the United States, and a
small segment of the market will be met with amorphous alloy, also expected to
be manufactured in the United States.”
“While the initial proposal would likely have represented
about a 95% market shift to amorphous alloy, under today’s final rule about 75%
of the market will be able to achieve the standards with GOES. The final rule
also extends the compliance timeline from three years to five years. These
changes are responsive to stakeholder concerns about the feasibility challenges
presented by the proposed efficiency levels, including the magnitude of
anticipated workforce reskilling. Today’s final rule gives manufacturers more
flexibility to meet modest efficiency increases as distribution manufacturers
prepare existing and develop new manufacturing lines to increase the nation’s
total distribution transformer manufacturing capacity.”
Amorphous steel
core transformers have significant efficiency advantages and will eventually
make up the bulk of new transformers, but that transition does need to be
slowed as manufacturing of both material types catches up to demand and this may
take a few years. Amorphous steel distribution transformers are highly
efficient, potentially reducing the amount of electricity lost by more than 70%.
According to Wikipedia:
“The main application of AMTs {amorphous metal
transformers} are the grid distribution transformers rated at about 50–1000
kVA. These transformers typically run 24 hours a day and at a low load factor
(average load divided by nominal load). The no load loss of these transformers
makes up a significant part of the loss of the whole distribution net.”
“More efficient transformers lead to a reduction of
generation requirement and, when using electric power generated from fossil
fuels, less CO2 emissions. This technology has been widely adopted by large
developing countries such as China and India where labour cost is low. AMT are
in fact more labour-intensive than conventional distribution transformers, a
reason that explains a very low adoption in the comparable (by size) European
market. These two countries can potentially save 25–30 TWh electricity
annually, eliminate 6-8 GW generation investment, and reduce 20–30 million tons
of CO2 emission by fully utilizing this technology.”
Thus, we can assume that amorphous steel core transformers
will eventually be the winner due simply to the winner as operating costs are
lower, However, domestic manufacturing costs and capacity still need to be addressed.
Overall, most agree
that a collaborative approach will best solve the transformer supply chain
crunch, which will involve government incentives in the short-term, more standardization
and less customization, more domestic manufacturing capacity in the U.S., and the adoption
of new designs.
References:
Hitachi
Energy commits $250M to address transformer shortage. Robert Walton. Utility
Dive. March 10, 2025. Hitachi
Energy commits $250M to address transformer shortage | Utility Dive
US
should create ‘virtual’ electric transformer reserve amid shortage concerns:
NIAC. Robert Walton. Utility Dive. September 13, 2024. US
should create ‘virtual’ electric transformer reserve amid shortage concerns:
NIAC | Utility Dive
Addressing
the Critical Shortage of Power Transformers to Ensure Reliability of the U.S.
Grid. National Infrastructure Advisory Council (NIAC). June 2024.
Addressing
the Critical Shortage of Power Transformers to Ensure Reliability of the U.S.
Grid
A look
at the great transformer shortage affecting U.S. utilities: An NREL team finds
that lead times for transformers has grown fourfold in three years, with orders
sometimes taking two years. Additionally price increases of four to nine times
have been reported in the past 3 years. Anne Fischer. March 7, 2024. A
look at the great transformer shortage affecting U.S. utilities – pv magazine
USA
Engineers
Transform Transformers to Save the Power Grid. Andrew Moseman. IEEE Spectrum.
December 11, 2024. Transformer
Shortage Crisis: Can New Engineering Solve It? - IEEE Spectrum
Are We
Short On Transformers? What Does That Mean? John Werner. Forbes. November 5,
2024. Are
We Short On Transformers? What Does That Mean?
Major
Drivers of Long-Term Distribution Transformer Demand. National Renewable Energy
Laboratory. 2024. Major
Drivers of Long-Term Distribution Transformer Demand
The
Transformer Crisis: An Industry on the Brink. Sonal Patel. Power Magazine. June
26, 2024. The
Transformer Crisis: An Industry on the Brink
DOE
Finalizes Energy Efficiency Standards for Distribution Transformers That
Protect Domestic Supply Chains and Jobs, Strengthen Grid Reliability, and
Deliver Billions in Energy Savings. U.S. Dept. of Energy. April 4, 2024. DOE
Finalizes Energy Efficiency Standards for Distribution Transformers That
Protect Domestic Supply Chains and Jobs, Strengthen Grid Reliability, and
Deliver Billions in Energy Savings | Department of Energy
Bipartisan
group of 12 senators proposes blocking DOE’s distribution transformer
efficiency rule. Robert Walton. Utility Dive. January 22, 2024. Bipartisan group of 12 senators
proposes blocking DOE’s distribution transformer efficiency rule | Utility Dive
Amorphous
metal transformer. Wikipedia. Amorphous
metal transformer - Wikipedia
Supply shortages and an inflexible market
give rise to high power transformer lead times. WoodMac symbol on white
background. Kevin Jacobs, Sagar Chopra, Aaron Barr, and Benjamin Boucher. Wood
MacKenzie. April 2, 2024. Supply
shortages and an inflexible market give rise to high power transformer lead
times | Wood Mackenzie
No comments:
Post a Comment