A look at the great transformer shortage affecting U.S. utilities


As the clean energy buildout continues to grow, one of the challenges looming over the industry is shortages and price increases in the global transformer market. National Renewable Energy Lab (NREL) researchers produced the report, Major Drivers of Long-Term Distribution Transformer Demand, in order to quantify the long-term demand for distribution transformers.

“Distribution transformers are a bedrock component of our energy infrastructure,” National Renewable Energy Laboratory (NREL) researcher Killian McKenna said. “But utilities needing to add or replace them are currently facing high prices and long wait times due to supply chain shortages. This has the potential to affect energy accessibility, reliability, affordability—everything.”

Reasons given for the shortages and price spikes include increased raw material demand, pandemic-related shortages and backlogs, labor constraints, shipping issues, and geopolitical tensions. In some parts of the world, the shortages are acute.

Transformers are a necessary piece of the energy puzzle, as they manage the flow of electricity along the power grid by changing high-voltage electricity from transmission lines into low-voltage electricity before it reaches consumers.

“A lot of factors can drive the demand for transformers, which makes long-term forecasting especially challenging,” McKenna said. “For instance, load growth from electrification of buildings and transportation, increased frequency and magnitude of extreme weather events, and the need to modernize aging electrical infrastructure can all impact the future demand for transformers.”

The NREL team is the first to quantify the number, capacity, age, and use of the nation’s current transformer stock. This was no small feat, as the nation’s transformers are owned by over 3,000 municipal, cooperative, and investor-owned utilities. About 20% of transformer capacity is privately owned by large commercial and industrial customers, according to the report authors.

The study found that utilities are experiencing extended lead times for transformers of up to two years (a fourfold increase on pre-2022 lead times) and reporting price increases by as much as four to nine times in the past 3 years.

According to the researchers, the increased demand is due to increased electrification, increased clean energy going to the grid as well as an aging electric infrastructure that needs replacement. Preliminary analysis estimates that overall stock capacity needs to grow 160% to 260% by 2050, compared to 2021 levels to meet increasing energy demands across residential, commercial, industrial and transportation sectors.

The Code of Federal Regulations defines distribution transformers as those that have an input voltage of 34.5 kV or less, an output voltage of 600 V or less, and a capacity of 10–2,500 kVA. For this study the researchers examined transformers up to 5,000 kVA because of the trend of increasing capacities due to electrification and also because of pending revisions in proposed rules. The authors state that they “loosely interpret input and output voltages, given the trend of bidirectional power flow due to distributed energy resources (in particular, solar photovoltaics).”

They also consider step-up transformers, used for renewable energy resources and most battery chains, and manufacturers as distribution transformers. Step-up transformers are used to convert low-voltage electrical generation into high-voltage electricity for long-distance transmission. The demand for these will grow as they are needed to integrate wind and solar farms onto the power grid by adjusting voltages, improving efficiency, and enhancing grid reliability.

Overall, they expect the type of transformers utilities will require is expected to change. Larger transformer sizes will be needed and pad-mount, dry-type, and submersible transformer demand will also increase 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. As previously mentioned, step-up transformer demand will also increase—all of which will put increased pressure on transformer manufacturing.

The analysis is based on estimating the peak demand that would need to be met by distribution transformers, which considers the increased electricity demand across the economy from scenarios outlined in NREL’s Electrification Futures Study.

An additional finding is that the demand for pad-mounted transformers (top) is expected to increase as utilities replace pole-mounted transformers (bottom) to improve safety and resilience. Images: Getty Images

Image: Getty Images

The insights gained from this work will help stakeholders better understand load metrics, including how an increased electrification scenario affects peak electricity demand, which will enable better distribution planning.

Seven trade groups, for example, have called for $1.2 billion in federal funding to help manufacturers of distribution transformers boost their production capacity, in a letter to U.S. Senate leadership. The letter states that “robust” domestic production of distribution transformers will help ensure a reliable U.S. grid, while also reducing dependence on importing products from overseas.

“The administration is focused on the importance of distribution transformers and other critical components to the reliability of our nation’s power grid,” said Gil Bindewald, principal deputy assistant secretary for the Office of Electricity. “We are grateful for the strong collaboration between all stakeholders that has occurred to-date and hopeful that this cutting-edge analysis will serve as a catalytical foundation to inform impactful solutions that ensure America can meet its emerging energy needs.”

The researchers concluded that demand modeling is critical to gaining a realistic understanding of future utility requirements. The NREL team said it will continue to work with the Office of Electricity and Office of Policy to refine their analysis to help the industry come to consensus on projected transformer demand.

This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.