June 01, 2023

Young, Colleagues Implore Biden Administration to Nullify Rule That Will Exacerbate Transformer Shortages, Jeopardize National Security, and Weaken Supply Chains and Workforce

WASHINGTON, D.C. — U.S. Senator Todd Young (R-Ind.) joined 46 of his colleagues in a bipartisan letter to Department of Energy (DOE) Secretary Jennifer Granholm, raising their concern about a proposed rule by the DOE that increases efficiency standards on distribution transformers—critical grid products—at a time when the availability of essential grid components remains a significant challenge for the electric power industry, and while the industry is struggling due to a substantial increase in demand, supply chain issues, and skilled workforce shortage.

The proposed rule, Energy Conservation Program: Energy Conservation Standards for Distribution Transformers, in effect, requires a shift from the industry standard grain oriented electrical steel (GOES) cores to amorphous steel cores, which would exasperate the supply chain shortage as manufacturers would need to adjust their production lines. The current domestic supply of amorphous steel is limited, and scaling up production to accommodate the entire distribution transformer market would cause further delays in manufacturing timelines. Average lead times to procure distribution transformers have already increased significantly, impacting grid modernization and reliability efforts.

“Currently, the United States only has one domestic producer of amorphous steel. Moving to amorphous steel cores, as proposed by DOE, would require this sole domestic supplier to rapidly scale operations from its current market share of less than five percent to accommodate the entire distribution transformer market. Such a recalibration of the supply chain will further delay manufacturing production timelines – currently estimated to be a minimum of 18 months to two years,” the Senators wrote.

The Senators acknowledged the actions that this and previous administrations have already taken in recognition of the challenges associated with distribution transformer supply chains but warned that this proposed rule would negate these advancements.

“By phasing out the primary market for U.S.-produced GOES, the Proposed Rule could jeopardize this progress, putting everyday American families at risk. Further, we are concerned that requiring the use of amorphous steel for new distribution transformers could put the administration’s electrification goals at risk by exacerbating an existing grid vulnerability. At the same time, we recognize the numerous and often underappreciated benefits of energy efficiency and support the overall goal of reducing wasteful electrical losses in our distribution grid. We believe the most prudent course of action is to let both GOES and amorphous steel cores coexist in the market, as they do today without government mandates, for new installations as we ramp up domestic production and reorient supply chains,” the Senators continued. 

The Senators concluded by urging the DOE to refrain from promulgating the final rule that will exacerbate transformer shortages and could come at a meaningful cost to grid reliability and national security, advancements in clean energy transition, and the bolstering of domestic supply chains and the workforce. Additionally, they requested a briefing with the DOE on the advancement of the proposal and how the DOE can address the supply chain challenges facing distribution transformers with its existing authority.

“We are committed to working with you to identify short and long-term solutions to the supply chain shortage of these critical grid components with a goal of building a robust domestic market and a more efficient and reliable grid for decades to come,” the Senators concluded.

A copy of the letter, including the full list of co-signers, can be found here