As wait times for transformers climb to 70 weeks, housing developments are struggling to turn the lights on

As American manufacturers struggle to keep pace with demand, wait times for power transformers have put housing and infrastructure projects across the country on hold.

Austin Energy executives joined City Council’s Austin Energy Utility Oversight Committee last week to discuss the nationwide shortage, reporting that new units are now taking nearly 70 weeks to arrive. Interim General Manager Stuart Reilly says the utility is taking a number of approaches to tackle the crisis, including expanding its vendor contracts outside the United States and relaxing equipment specification standards.

“Right now we’re seeing this materialize as we’re talking about new development needs and getting critical housing stock online in the Austin area, specifically reasonably priced or affordable housing,” said Reilly. “The last thing we want is for that housing supply to be ready and for us to be unable to energize them because we’re still waiting on transformers.”

America’s transformer supply has been uniquely vulnerable to market disruptions amid the Covid-19 pandemic, due in part to a lack of domestic raw material sources and a shrinking manufacturing workforce. At the same time, the shift toward renewable energy and electric vehicles has meant demand continues to climb.

“Some of the raw materials at issue involve the silicon steel core … right now there is only one domestic source for that silicon or that electric steel. It’s very constrained and there aren’t many foreign suppliers either,” said Reilly. “In addition, electric vehicles use that material in a way that’s cheaper and with a higher markup, so we expect that supply constraint to continue as additional factories come online, which could take a few years.”

In addition to bottlenecking, the industry is also facing steep price increases, with parts for substation and distribution transformers up by 58 percent to 84 percent since 2019.

Austin Energy is not the first to sound the alarm – a coalition of stakeholders, including the American Public Power Association and National Association of Home Builders, has written numerous letters to the Biden administration urging federal action. While there was brief discussion of allocating Inflation Reduction Act funding to help mitigate the crisis, the amendment did not make it to the finish line.

With federal assistance temporarily off the table, Austin Energy says it is working to broaden its pool of supplier contracts, both simplifying its equipment specification standards and issuing a request for information to vendors outside the United States. Austin Energy also has partnered with a vendor of refurbished transformers, procuring equipment with a 47-week lead versus the 70-week industry average. 

“We’ve never had to go outside of the United States to track down transformers, but we are doing that now,” said Reilly. “The more our specifications locally can be the most generic, cookie-cutter, off-the-shelf units, the better it is for us in terms of tracking units down.”

In the meantime, Reilly says the shortage will continue to be a headache for staff, developers and ratepayers alike for the foreseeable future.

“This is, of course, going to put upward pressure on rates going forward,” said Reilly. “We do not see the supply-chain crisis ending anytime soon, and we do not see these price escalations ending anytime soon either.”

Photo made available via a Creative Commons license.

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