Dive Brief:
- The U.S. Department of Energy has been listening to criticism of its proposed rule to tighten energy efficiency requirements for distribution transformers and “adjustments have been made,” Secretary of Energy Jennifer Granholm told a Congressional subcommittee on Wednesday. A final rule is expected before June, she said.
- A shortage of distribution transformers has slowed the development of new housing and manufacturing projects that need grid access, lawmakers said. And requiring greater efficiency from these devices would worsen the supply chain situation while also threatening the nation’s steel production, they said.
- Transformer manufacturers say they are encouraged by what they heard at yesterday’s hearing to discuss DOE’s Fiscal Year 2025 budget request. But they also say the Biden administration must do more to meet the growing demand for electrical equipment.
Dive Insight:
Granholm received multiple questions about electric grid capacity and DOE’s pending distribution transformer rule, which has faced criticism for its potential impact on electrification efforts and the clean energy transition.
DOE proposed stricter efficiency standards for transformers in 2022, but utilities and other stakeholders have said the rules would worsen the existing transformer shortage by requiring the use of amorphous steel cores rather than those using grain-oriented electrical steel, known as GOES.
Rep. Marcy Kaptur, D-Ohio, said she was concerned the final rule would adversely impact domestic steel production, and with that, national security.
The nation’s only manufacturer of GOES is Cleveland Cliffs. The company has indicated it will close its Butler, Pennsylvania, and Zanesville, Ohio, electrical steel operations if the rule is finalized, Kaptur said. “This would be tragic for the over 1,300 union workers and undermine domestic supply chains,” she said.
Rep. Joseph Morelle, D-N.Y., said that in his district there have been “housing projects and new manufacturers that have really struggled to get access to the grid” due to the transformer shortage, creating an economic bottleneck. “We’ve been surprised at the number of projects that have been held up,” he said, with transformers taking 3-4 years to build and install.
Granholm said there are three primary drivers of transformer supply chain issues: labor availability and training, access to materials such as GOES, and manufacturing capacity.
“However, we now have started to see manufacturers expand in the United States,” Granholm said. Eaton, Prolec GE USA and Siemens “have all announced that they are expanding, whether its [manufacturing] distribution transformers or big power transformers. We're encouraged by that, but more needs to be done.”
Granholm said DOE has been taking feedback from a wide range of industry stakeholders ahead of the final rule being published. “We have heard, and adjustments have been made,” she said.
DOE’s draft rule proposed the new energy efficiency standard for distribution transformers take effect in 2027, estimating it would save consumers approximately $15 billion over 30 years. The agency has indicated it intends to issue a final rule in April.
Equipment manufacturers say Granholm struck the right tone at yesterday’s hearing.
“We are encouraged to hear the Secretary’s words and that the Department is listening to the real and practical concerns from a wide range of industry sectors and labor organizations,” Peter Ferrell, director of government relations for the National Electrical Manufacturers Association, or NEMA, said in an email.
But finalizing a final transformer rule that includes a compromise is only one step in addressing the supply shortage, Ferrell said.
In January, NEMA and other groups, including the Edison Electric Institute and National Rural Electric Cooperative Association urged lawmakers to appropriate $1.2 billion to “bolster domestic transformer manufacturing and other critical grid components” through financial, procurement and technical assistance and workforce support. But that funding was not included in DOE’s FY 2025 budget request.
“Federal resources are still needed to help manufactures meet the current and growing demands for distribution transformers, especially as the industry is forced to change manufacturing processes to comply with the final DOE rule and as the country continues its move towards electrification,” Ferrell said.
