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Tuesday, January 31, 2023

Electricity transformer funding: a wonky but necessary solution to a critical resilience problem

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In early December, 45,000 residents in North Carolina went without power after unknown saboteurs fired on critical electric transformers.  Due to our current transformer shortage, it will take days to fully restore power and replacements will likely cost millions of dollars. This attack clearly demonstrates the vulnerabilities faced by the electric grid and the urgent need for Congress to allocate funds toward solving the present national deficit of electrical transformers. Supporting a resilient supply chain and emergency response is critical to ensuring a functioning grid that can withstand such crises.

Electrical transformers are the core components and unsung heroes of our nation’s 65,000 electricity substations. They are the equipment that enables our grid to move power efficiently and reliably over long distances and then bring it into our homes at safe levels. Their necessity makes the severe shortage we face so alarming, which is why swift federal action is needed. 

Offshoring, supply chain delays, COVID-related energy load fluctuations, and a rise in extreme weather have all contributed to this worrisome scarcity. Transformers are now more expensive to purchase, take longer to order, and are more frequently produced abroad. This, in turn, threatens grid resiliency, national security, and our prospects for a clean energy future.

To fully grasp their widespread significance, it is helpful to understand the differences between the two primary types of transformers. First, we have large power transformers. These are 600,000+ lbs. behemoths that take bulk power sent from a generator and step down the voltage at regional substations to allow for local delivery. 

Pool top transformers—the ubiquitous gray cylinders that sit atop our streets’ utility pole—may be familiar to the average American. These convert power to a safe level we can use for everyday tasks.Transformers are the backbone of the grid, the often overlooked but integralintermediaries that enable the system to move power efficiently and safely. 

Several factors contribute to the current shortage of essential electric infrastructure. Offshoring has decimated our domestic manufacturing supply for years as cheap labor abroad priced out domestic companies. The complicated engineering and delicate technical skills needed to produce transformers make the business a time and resource-intensive industry. Fewer workers have entered the labor pool with the training or skills needed for such specialized positions, while the number of experienced technicians has dwindled. As a result, only eight companies still manufacture transformers domestically. Since 2020, prices have increased for some models by over 400 percent, and wait times have doubled

All of this heightens existing anxieties about grid reliability in the face of climate change and other risks. Extreme weather events are increasing and can knock out significant portions of the power supply. In 2021, Hurricane Ida damaged 5,600 pole top transformers and destroyed twice the number of utility poles Katrina did in 2005. As a result, over 900,000 people lost power in Louisiana. A limited transformer supply prone to unpredictable delays will also impede America’s energy transition and forestall progress toward our 2035 decarbonization goals

The transformer shortage has also exacerbated national security concerns. As seen in North Carolina, a wide array of improbable and unanticipated events can trigger system vulnerabilities if they come to pass. Without a functioning grid, the lights will literally go dark. In North Carolina’s Moore County, schools and businesses have closed, and some residents have been without running water or heat for three days while they endure winter temperatures.

This weekend’s attacks are not the first time such an assault has threatened the grid. In 2013, 17 transformers were shot and damaged by sniper fire during a deliberate attack on a California substation. Widespread concern prompted FERC to study grid vulnerabilities and recommend methods to prevent widespread electrical outages in the event of future aggression. More recently, cyber threats have intensified, and the Colonial Pipeline hack showed how energy infrastructure could be an enticing target to foreign actors.

Addressing our transformer shortage is critical to ensure resiliency, strengthen our emergency response capabilities, and build a clean grid. To do so, Congress should allocate a few billion dollars in Defense Production Act funding to boost short-term resources for domestic transformer manufacturing and secure a strategic reserve. Establishing such a stockpile and outlining a plan for efficient transportation in response to emergencies will help maintain functionality during disasters. In the long term, securing a sustainable and accessible supply of transformers will lead us to a safe, green, and resilient future.

Johan Cavert is Niskanen Center’s transmission policy analyst.



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