Electric Utilities Around the US are Running Out of Transformers

A nationwide shortage of a key component in power grids could stymie new housing developments, hamper efforts to build electric vehicle charging stations and leave storm-struck communities without power for extended periods of time, experts warn.

The potential consequences all stem from a scarcity of transformers, which are needed to hook up retail customers like homeowners to power lines. The transformers usually hang from utility poles or are mounted on concrete pads and enclosed by metal cases. They’re a basic but critically important piece of equipment for delivering electricity.

In recent months, though, utilities have been reporting wait times of over a year to get transformers, and say costs have skyrocketed from $3,000 to $4,000 per transformer before the shortage, to more than $20,000 each now.  

In a booming town like Roseville, California, north of Sacramento, the transformer shortage threatens to slow the pace of new subdivisions being constructed. The city has been adding about 1,800 homes a year, which would require roughly 180 transformers to service them.

“We’ve had to tell our builders and developers: I’m sorry, we don’t have any transformers that they can put out in the field for you to build your houses with, because we have to save enough to keep our existing customers with power,” said Dan Beans, the city’s electric utility director. The city utility keeps some transformers on hand, in case existing ones stop working from old age, weather or even traffic crashes.

With so much of the economy tied up in homebuilding, Beans worries about the broader fallout if the transformer shortage continues for much longer.

“This could have a serious impact on economic development for all cities,” Beans said. “Even more than that, this is a national security issue if we can’t keep the lights on and keep business moving. And you’re going to be taking steps backwards on climate change. If you want to keep going forward, we have to keep the grid connected.”

In fact, the transformer shortage is one of the top priorities of public utilities around the country, said Corry Marshall, the senior director of government relations at the American Public Power Association. Roughly 80% of its members reported earlier this year they had less equipment on hand than in 2018, before the pandemic interrupted supply chains. (Investor-owned utilities have also reported similar shortages.)

Small transformers were the item the utilities most needed, followed by larger transformers, conduit and utility poles. The community power companies reported that the wait times for small transformers had grown from three months to at least a year, Marshall said. Since then, several APPA members have said the delays have grown to as long as two years, he added.

With so few transformers available, some utilities have started refurbishing old ones and putting them back in service, Marshall said. Others have rewired existing circuits to free up transformers for other uses. Both approaches are labor- and time-intensive, and they can only make modest improvements.

Many utilities have had to take more drastic actions.

The public utility district for Clallam County in Washington state announced in May it had completely run out of pad-mounted transformers, and it wouldn’t be taking any more requests for construction that would require that type of equipment.

“The PUD fully understands this transformer shortage is having a very detrimental impact on the local construction and building industry, as well as the economy more generally,” the utility wrote in a statement. 

“For more than a year we have taken every action available to us to mitigate the transformer shortage, but we are now completely out of such pad-mounted transformers with no prospect of a timely remedy,” it added.. 

The utility allowed builders to use pole-mounted transformers instead but warned that it would likely exhaust its supply of those, as well.

In New Braunfels, Texas, the power utility told customers that only six of the 149 transformers it had expected in June were actually delivered. Even though New Braunfels Utilities has orders placed for more than 400 more transformers, the utility said it expected to get only six a month for the foreseeable future.

The delays prompted the utility to change some of its procedures, so homebuilders could move ahead with water and sewer acceptances before electricity is installed in new houses. The electric utility warned, though, that doing so would mean “building at your own risk.”

“Any delay in receiving electric service should be shared upfront with potential home buyers to help manage expectations as to when a house will be ready for occupancy,” the utility cautioned. “The account will remain in a builder’s/developer’s name and cannot be transferred to a homeowner until electric, water, and/or sewer service/meters are in place.”

Searching for a Solution

Electric utilities are trying to figure out how to end the shortages, but they say it’s not entirely clear why the transformers suddenly became so hard to find in the last year.

“We are complaining about something that isn’t done by us. We are not the manufacturers of distribution transformers,” said the APPA’s Marshall. “There is a manufacturing sector that handles that.”

Manufacturers, though, haven’t offered many details so far about the problem.

Some, Marshall said, indicated that they are having a hard time getting all the materials they need for transformers.

The transformers require grain oriented electrical steel, a soft material made of iron and silicon with special magnetic properties that helps prevent energy loss. 

That material, like other steel-based products, has been in short supply for a year. Only one U.S. company – Cleveland-Cliffs Inc. – produces it, and overseas companies face shipping challenges and increased worldwide demand. (Cleveland-Cliffs did not respond to a request for comment.)

The steel industry more broadly has been disrupted in recent years, after President Trump imposed tariffs on steel imports in 2018. President Biden eased some of those tariffs for European and Japanese products, but the taxes on imports from China still remain.

Other manufacturers have indicated they are struggling to find enough workers, Marshall said.

On top of that, the U.S. Department of Energy imposed higher efficiency standards on distribution transformers, which APPA argued would increase the costs – and reduce the profitability – of making new transformers. The group, along with the National Rural Electric Cooperative Association, asked the federal government to relax those standards to alleviate the current shortage. But the Department of Energy has so far declined.

In June, Biden invoked the Defense Production Act in an effort to ease the shortage of transformers and other energy-related components. The Korean War-era law gives the federal government special powers to support the military or protect homeland security, including the ability to preempt other customers, conserve scarce materials or order increased production of specified goods.

It’s still unclear what the federal government can or will do with that new authority, in the case of the transformers, especially because the law rarely has been used in the energy industry, Marshall said.

The federal government could use it to prepare for a natural disaster, like a hurricane, that knocks out electric power. It could ensure that scarce supplies are directed to the affected area, without resolving the bigger problem of transformer shortages, Marshall said. “Are you robbing Peter to pay Paul in that instance? We don’t know the answer to that question,” he said.