pwr_june-2024 - 16

TRANSFORMERS
The Transformer Crisis:
An Industry on the Brink
Facing unprecedented lead times and skyrocketing costs, the transformer supply
chain crisis threatens the backbone of the electric power industry, driving urgent
calls for increased manufacturing capacity and innovative solutions. Can the industry
rise to the challenge?
Sonal Patel
F
or several years now, the power
sector has frantically raised the
alarm about an impending transformer
supply chain crisis, seeking to
reinforce the availability of the component
that many consider the backbone of
the electric industry. But since the COVID
pandemic, the crisis has descended
full-blown and grown crippling. In April,
global research and consultancy firm
Wood Mackenzie warned that transformer
lead times have continued an upward
trajectory and now stand at 115 to 130
weeks-more than two years-on average.
Lead times for large transformers,
both substation power transformers and
generator step-up (GSU) transformers,
have surged to 120 to 210 weeks-or 2.3
to 4 years. At the same time, depending
on the size and application, transformer
prices have risen 60% to 80% on average
since January 2020, driven upward
by raw material commodities. Prices for
grain-oriented
electrical
steel (GOES),
though significantly volatile, have almost
doubled since the pandemic, while copper
prices surged upwards of 40%.
" For reference, pre-pandemic lead
times ranged from 30-60 weeks, depending
on specifications/size and if the
transformer had been regularly ordered
over time with a proven design (therefore
allowing the manufacturing process
to be streamlined), " the firm noted. Now,
" averages continue to rise quarter to
quarter [Figure 1] with no clear signs of
relief (i.e., new manufacturing capacity)
and the extreme growth of grid-tied renewable
projects will keep up a relentless
demand for the next decade. "
Transformer Demand Drivers
Testing Current Inventory
The crisis comes as the power sector
grapples with an unprecedented boom,
both for new modes of power generation
and power demand. Transformers
have been an indispensable component
16
for competitive transmission of electric
power since 1891, when their invention
proved to be a breakthrough. " Transformers
made it possible to generate
electric power at low voltages and then
transform it to a higher level at which
transmission incurs considerably lower
losses, and finally, transform the voltage
back to a safer level at the site of
consumption, " explains Hitachi Energy
(then ABB) in a written history. The most
recent transformer manufacturing boom
came between 2004 and 2007, driven by
growing power demand, advancements
in insulation and cooling technologies,
and the need for higher voltage and
larger capacity transformers to support
industrial and urban development.
But today, the grid is undergoing a
forceful, unprecedented shift, propelled
by the triple-impact push for decarbonization,
the necessity to replace aging
infrastructure, and the urgent expansion
required due to vigorous demand, including
from new loads like data centers
and electrification of the industry, commercial,
transportation, and residential
sectors. " I've been in this industry for
32 years, and I've seen booms and busts
in our industry, " said Richard Voorberg,
president of Siemens Energy, North
America. " I've never seen something
like this that is going up at such a rate
that looks sustainable as well. "
According to Joshua Yun, senior vice
president of Sales and Marketing at Virginia
Transformer, the largest U.S-owned
transformer manufacturer in North America,
the current market gap for transformers
stems from a " perfect storm "
of drivers, where post-pandemic pentup
demand unleashed a " big tsunami "
across every market segment, spanning
from energy to bitcoin mining to artificial
intelligence. " I've never seen a market dynamic
like this, " he said during the 2024
IEEE PES T&D Conference & Exposition
in Anaheim, California, in May.
If the current transformer boom could
www.powermag.com
1.
As large developers and utilities increase
transformer orders, lead times for large power
transformers and generator step-up units
have surged to 120-130 weeks on average as
of the fourth quarter of 2023, with no signs of
relief. Pre-pandemic, lead times ranged from
30-60 weeks. Courtesy: Wood Mackenzie
Supply Chain
be boiled down to two key factors, they
would cover a critical need for reliability
and resilience, Wade Lauer, senior vice
president of Grid Technologies at Siemens
Energy, North America, told POWER.
A big worry is how old the transformer
fleet already is. A 2020 study by the U.S.
Department of Commerce suggests that
the average age of in-service large power
transformers (LPTs) is 38 years-near
or even past design life. Meanwhile, the
Electric Power Research Institute (EPRI)
has said changing duty cycles linked to
grid transformation and renewable energy
integration may shorten the lifespan
of certain transformers or cause capacity
deratings, further straining the available
capacity. Moreover, the nation's current
stock of between 60 million and 80 million
distribution transformers could need
to increase between 160% and 260%
compared to 2021 levels, the National
Renewable Energy Laboratory (NREL)
estimated in February.
Prominent among the myriad drivers
NREL pointed to that support an urgent
boost for expanded transformer manufacturing
capacity relates to significant
transformer damage from the increasing
frequency and severity of extreme weather
events. Additionally, " the type of transformers
utilities will require is expected
to change; demand for larger transformer
sizes is expected to increase due to electrification, "
it noted. The lab suggests that
POWER | June 2024
http://www.powermag.com
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