Market Insights

Addressing Transformer Supply Chain Challenges for a Resilient Grid

August 25, 2023 by Jake Hertz

An analysis by the Government Accountability Office sheds light on the challenges facing the transformer supply chain and the role the U.S. Department of Energy (DOE) can play in addressing them. What can we learn?

Grid resilience is a hot-button topic in the rapidly developing power electronics landscape and broader electricity industry. Specifically, the supply chain of grid components such as large power transformers (LPTs) is critical for ensuring a robust and reliable grid well into the future.

A large power transformer

A large power transformer. Image used courtesy of GE


A Government Accountability Office (GAO) analysis sheds light on the challenges facing the transformer supply chain and the role the U.S. Department of Energy (DOE) can play in addressing these challenges. What can we learn from the analysis?


Current State of Affairs

According to the GAO's findings, the DOE can assist the electricity industry in securing modern LPTs. However, the challenge lies not in the acknowledgment of the problem but in the execution of solutions. 

While the DOE has recognized the need to support the electricity industry in ensuring adequate reserves of spare transformers, it has yet to develop concrete implementation plans. This gap between knowledge and action is concerning, as it could increase vulnerabilities in the grid system.


Transformer Challenges Ahead

The challenges facing the transformer supply chain are multifaceted. 

For starters, the US supply chain surrounding LPTs operates in entirely undesirable ways. According to reports, 82% of the country’s LPTs before the pandemic came as imports, meaning the country strongly relies on foreign support. Additionally, the estimated average age of an installed LPT in the U.S. is 40 – the end of their operational lifetime. As a testament to these issues, utility companies have identified supply chain constraints as a significant concern for the future of LPTs, both in active use and reserve.


Typical hazard curve for a large power transformer

Typical hazard curve for a large power transformer. Image used courtesy of Elsco Transformers 

The financial implications are also considerable. The GAO indicates that LPTs can cost up to $10 million to purchase, with additional thousands required for transportation. Given their pivotal role as voltage managers on the grid, the reluctance to maintain spare transformers due to these costs is alarming.

Furthermore, the industry grapples with extended manufacturing lead times, limited manufacturing capacity, and shortages in both labor and materials. A lack of standardization among transformers exacerbates these supply chain constraints. Without a standardized approach, solutions may not adequately address the root issues, leaving the grid vulnerable to natural disasters, cyber threats, and physical attacks.


The Way Forward

The GAO's call for the DOE to produce comprehensive plans is timely and crucial. These plans should encompass time frames, solutions to address supply chain challenges, and strategies to encourage utilities to participate in industry-wide sharing efforts. 

Within this, the GAO believes that collaboration is key. The report suggests that smaller utility companies can increase LPT reserves by fostering an industry-wide culture of sharing. 

The GAO also believes these challenges could be solved by developing standardization among transformers. For engineers in the power electronics industry, this presents an opportunity. The need for innovation in transformer design, manufacturing processes, and supply chain management is evident. Engineers can lead the charge in developing standardized transformer models that can be produced more efficiently, reducing lead times and costs.

Moreover, the industry can explore alternative materials and manufacturing techniques to mitigate current shortages. Embracing digitalization and leveraging technologies like artificial intelligence and machine learning can optimize supply chain operations, ensuring transformers are produced and delivered when and where they are most needed.

The GAO's analysis serves as a warning for the electricity industry at large. The challenges faced by the transformer supply chain are significant but not insurmountable. With a concerted effort, collaboration, and innovation, the GAO believes we can still ensure a resilient grid for the future.