The electric transformer shortage

19 snips

Feb 22, 2024

The podcast discusses the shortage of electric transformers, with lead times exceeding two years and prices soaring over 60%. They explore the reasons behind the shortage, such as rising demand from renewables, storms, federal investment, and EV chargers. The housing market crash of the 2000s made manufacturers cautious, while labor shortages and new DOE rules add to the challenges.

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INSIGHT

Lead Times Jumped From Months To Years

In 2018 US distribution transformer lead times were typically 12–14 weeks. By 2023 many pad-mounted units reached up to two years due to rising demand and constrained capacity.

ANECDOTE

2006–07 Housing Bust Shrank Capacity

Tim links historical transformer volume to the US housing cycle and recalls 2006–07 peaks followed by a crash. That bust led many manufacturers to shrink or exit, leaving capacity stagnant into the 2010s.

INSIGHT

Multiple Demand Drivers Converged

Demand growth came from multiple sources beyond housing: federal infrastructure spending, EVs, renewables, and increasing storm-driven replacements. Those drivers converged after 2020 to overwhelm existing manufacturing capacity.

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The list of things that depend on transformers is long: new housing, EV chargers, renewable projects, and more. That’s why skyrocketing lead times and prices for grid equipment that raises or lowers voltage is a real problem.

The wait for a new transformer has jumped to over two years, according to WoodMackenzie. Back in 2020 it took just a few months, according to Tim Mills, CEO at transformer manufacturer ERMCO. WoodMackenzie found that prices, meanwhile, have risen over 60% since 2020.

So what’s causing the shortage?

In this episode, Shayle talks to Tim about how rising demand for transformers has pushed manufacturers to capacity – and why it’s been so hard for manufacturers to expand that capacity.

They also cover topics like:

The state of the shortage, including prices, lead times and types of transformers that are in especially short supply.
The major drivers of demand growth, including renewables, storms, federal investment, and EV chargers.
How the housing boom and bust of the 2000s left transformer manufacturers wary of bubbles in demand.
Why the tight labor market makes it hard to expand manufacturing capacity.
How new rules proposed by the Department of Energy are throwing uncertainty into what type of equipment manufacturers should invest in.

Recommended resources:

WoodMackenzie: Supply shortages and an inflexible market give rise to high power transformer lead times
T&D World: No Easy Answers: Transformer Supply Crisis Deepens

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