from blog of large distributor From Border States the 6th largest electrical distributor in the US December and January 2023 blogs
we continue to hear from several customers, like utilities and large contractors, that they are not slowing their workplans at this time or have large backlogs that have built up over the past three years.
Below are the top categories where we are seeing extended lead times and material availability challenges:
Transformers, capacitors, voltage regulators, pad-mount switchgear, fiber optic cable and category cable
While transformer manufacturers continue to make gains in the production process, demand is still outpacing them. Many of these manufacturers are producing 20%–30% more product than pre-COVID-19 levels; however, increasing production even further is being hindered by labor constraints and gaps in supply for subcomponents.
Only one domestic manufacturer remains for electric steel in the United States, and transformers use grain-oriented electrical steel. EVs use non-grain-oriented electrical steel, which competes for production of grain-oriented steel.
Fabrication of oil-filled transformer tanks requires skilled welders, which is a major group represented in the labor shortage.
Without major changes in supply or demand, supply of transformers will remain a challenge, and projects may be impacted. We believe a higher-level solution is necessary to address the supply and demand imbalances as we transition to electric transportation. Understanding federal recommendations and impacts to the supply chain will help in appropriately planning for necessary investments.
What’s being done: President Biden invoked the Defense Production Act in June to help address the need for domestic manufacturing for transformers and electric power grid components. However, manufacturers say this action is unlikely to reduce their backlog:
The portion of the act that’s being applied would create funding for domestic clean energy technology, but it doesn’t directly increase transformer production.
Requiring suppliers of raw materials and subcomponents to prioritize transformer manufacturers would help stabilize supply chain delays, but it remains unclear whether this will come to fruition.
In the meantime, the CEO-led Electricity Subsector Coordinating Council (ESCC) is recommending strategies to the federal government to help remediate supply of transformers and the potential risks to critical infrastructure. Recommendations from the ESCC to the Department of Energy are expected to be submitted by Saturday, December 31. Funding from the Inflation Reduction Act may be part of the solution.