Transformer shortage timing couldn't be worse

If you thought there couldn’t be more hurdles to transmission development, think again. Now, you can add skyrocketing transformer prices to the long list of factors hamstringing transmission that includes: convoluted regulations, never ending sitting processus, and NIMBYSIM. 

When I first found out about the transformer shortage, I assumed it could be chalked up to the normal set of post COVID supply-chain issues affecting much of our economy. However, it turns out that the causes might be broader in scope, predating the pandemic in some instances. For example, the grain oriented steel necessary for transformer production has dwindled probably in part to Trump era steel tariffs. More recently, the Department of Energy slapped new efficiency standards on distribution transformers, promoting a backlash from the APPA, which argued the regulations would make it more expensive to produce transformers. 

Whatever the reasons, the transformer shortage is wreaking havoc on the utility industry. This article on route-fifty.com details how the situation is affecting an area in northern California: 

"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.”

The latest transformer crisis is just more wood on top of the fire that is transmission development in the United States. Just consider this fact reported in an Atlantic article last year: “Since 2009, China has built more than 18,000 miles of ultrahigh-voltage transmission lines. The U.S. has built zero.” 

The reasons for our transmission stagnation are complicated, but a big part of the blame lies with America’s special community input mechanisms. Although well-intentioned, they too often allow small minorities of loud complainers bring down projects that would provide net benefit to society. 

This problem was explained in a very good Atlantic article earlier this year: 

“The community-input process is disastrous for two broad reasons. First, community input is not representative of the local population. Second, the perception of who counts as part of an affected local community tends to include everyone who feels the negative costs of development but only a fragment of the beneficiaries.

Not everybody is a complainer, but pretty much everyone who shows up to community meetings is. Katherine Einstein, David Glick, and Maxwell Palmer, Boston University political scientists and co-authors of Neighborhood Defenders, examined zoning and planning meetings across Massachusetts. They found that a measly 14.6 percent of people who showed up to these events were in favor of the relevant projects. Meeting participants were also 25 percentage points more likely to be homeowners and were significantly older, maler, and whiter than their communities.”

We see these pernicious community input mechanisms sideline important transmission projects far too frequently.

The New England Clean Energy Connect (NECEC) has been perhaps the most high profile of embattled transmission projects. For those who don’t know, NECEC is a transmission line that would transport hydropower from Quebec to the Massachusetts grid. The NECEC would have a big impact on Massachusetts’ energy portfolio. The transmission project promised to transport 9.45 million MWh of electricity from Hydro-Quebec to Massachusetts every year. That would account for around 8% of the electricity used in all of New England, powering close to 1.2 million homes.

However the project was brought to a standstill for over a year thanks to a mix concerned residents, environmental groups, Native American tribes, and rival utilities who fought against the line. They successfully got Maine voters to pass a measure that halted the project last November. Any day now, the state's Supreme Court will issue a ruling on whether the measure is legal. Even if the project gets off the ground in the end, valuable time in the fight against climate change will have been wasted. 

If the United States is to quit fossil fuels by 2050 and also boost power dependability during a time of increasingly extreme weather, the transmission system must be radically improved. The big question is whether we can revolutionize our regulatory system to promote, instead of stymie, powerlines. That being said, a 500% hike in transformer prices don’t make things any easier.