The U.S. Department of Energy isn’t doing enough to help electric utilities face potential shortages of large power transformers (LPTs), which could jeopardize reliability of the nation’s high-voltage transmission grid, according to a new report from the Government Accountability Office. GAO is the Congressional watchdog agency that reviews executive branch agency performance.
In its August 2 report – “DOE Could Better Support Industry Efforts to Ensure Adequate Transformer Reserves” – GAO said, “DOE has identified options for addressing the supply chain challenges that affect utilities’ ability to ensure adequate reserves but has not developed plans that specify how to implement these options.”
The report noted that last year, DOE looked at how the venerable Defense Production Act could be used to assure domestic manufacturing of the vital transformers – most of which are now imported. “However,” said GAO, “DOE officials have not identified actionable objectives, or time frames, for these efforts.”
A 2017 DOE report “recommended supporting industry sharing efforts to ensure adequate reserves by encouraging the participation of smaller, resource-constrained utilities in such efforts. However, DOE does not have a plan for operationalizing such support. Without plans to guide DOE’s efforts to address supply chain challenges and to facilitate solutions to ensure adequate reserves, these efforts could stall or remain incomplete, leaving critical grid infrastructure vulnerable.”
According to GAO, “Transformers are vulnerable to a range of threats. Wear and tear from normal operation causes all transformers to age and eventually need replacement, although with proper maintenance transformer life can be expected to last many decades. In addition, extreme weather can damage transformers. Threats to transformers also include natural disasters—such as earthquakes, wildfires, and electromagnetic events.”
Human attacks, physical and cyber, on transformers have also recently threatened electric supplies, GAO notes. “In 2013, a substation attack in California caused more than $15 million in damage. At the end of 2022, multiple attacks on substations occurred in North Carolina, Oregon, and Washington. As of early 2023, the motives behind the attacks from the 2022 attacks were still under investigation.”
LPTs are expensive, up to $10 million apiece, with transportation costs to the site ranging up to hundreds of thousands of dollars.
The largest challenge to transformer supply adequacy, said GAO, is the supply chain. Key problems include:
- Manufacturing lead times. This has been a problem both for the LPTs and for the more common and familiar distribution transformers used to supply electric customers. GAO reported that “some utilities highlighted LPTs specifically as experiencing worsening delays” and for some utilities “previous LPT lead times of 12 to 18 months had increased to 18 to 36 months.”
- Manufacturing capacity. Reports GAO, “According to industry officials, transformer manufacturers face challenges keeping up with demand due to constraints such as the size of existing factories and workforce availability.”
- Materials and components shortages. GAO cites, for example, increasingly limited availability of grain-oriented electrical steel (GOES), an especially critical material. “According to Commerce and DOE reports, there is only one company in the U.S. that produces GOES, and domestic transformer manufacturers told both us and Commerce that its product is of insufficient quality to meet their standards.”
- Labor shortages. According to the report, “Transformer manufacturing and refurbishment, especially for LPTs, is labor intensive and requires specialized training. In addition, prospective employees must be willing to work at factories in relatively remote locations.”
- Foreign competition. GAO reported that “most transformer manufacturing capacity is located abroad, and Commerce reported in 2020 that over 80 percent of LPTs in 2019 were imported. In addition, domestic LPT manufacturers reported to DOE that foreign manufacturers regularly sold their transformers in the U.S. market at a price that is below the cost of domestic production.” That’s know in foreign trade circles as “dumping,” technically illegal but hard to prove.
- Logistics. The large size and heavy weight of LPTs complicates their use. Officials of one utility told GAO that “moving an LPT via flatbed truck over a distance of about 275 miles cost over $400,000. Moreover, officials from some utilities told us that moving LPTs on and off vehicles and into position requires specialized equipment and trained personnel. Vehicles for LPT transport are expensive and customized for that task and not readily available.”
- Sticker shock. With price tags of up to $10 million, some utilities said that “purchasing a spare LPT was an expense they could not afford, even if they were otherwise operating LPTs that are critical to the whole electricity grid.” Others said they faced opposition from customers and regulators for these sorts of expenditures.
- Lack of standardization. GAO noted that “grid infrastructure, including substations and LPTs, is not standardized, making it difficult to have spares that can replace more than one specific LPT. This also affects the cost of new LPTs, as they are often custom designed.”
- Threats. According to utility officials, spare LPTs face the same threats as working machines, “requiring measures to mitigate those threats, which may be costly. For example, measures like fencing, cameras, or bulletproof walls used to protect an LPT in operation would need to include the spare LPT if stored on-site.”
What can government do about this issue? Despite the finger pointing of the title of the GAO report, the honest answer is, “Not much.” For years, there has been talk about a DOE “strategic transformer reserve,” modeled on the decades-old Strategic Petroleum Reserve. But, according to GAO, this is a non-starter for several key reasons. Oil is basically a fungible, natural resource. LPTs are not, nor are they like interchangeable auto parts. They are custom pieces of equipment. And a transformer reserve “would require numerous different transformer types to accommodate potential needs from systems across the nation.” Also, notes GAO, “Purchasing and deploying any federally owned spares would face the same logistical challenges as transformers purchased by utilities.”
What DOE can do, and it’s pretty small policy beer, is turn the multiple reports on the topic it has performed over the years, with multiple options for utilities themselves to implement, over to the utilities, aiding ongoing but uncoordinated industry initiatives. “However, the agency has not developed a plan that specifies how to implement these options.”
–Kennedy Maize
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