The U.S. electric power supply chain is facing a host of disruptors in the nation’s quest for 24/7 clean energy. This is compelling utilities and renewable energy companies to revamp their management strategies with the help of policymakers and other stakeholders.

Supply is currently not meeting increasing demand as electrification efforts intensify, according to Marlene Motyka, U.S. renewable energy leader and principal in transactions and business analytics for Deloitte, New York.

“The cleantech manufacturing, A.I. [artificial intelligence] and carbon industries are now competing among themselves and with other industrial customers to meet their infrastructural power demand at least in part with 24/7 clean energy,” she said.

Load growth from cleantech manufacturing plants, which could add 11 gigawatts (GW) of demand by 2030, is an anticipated long-term trend resulting from supply chain reshoring to meet domestic energy needs, she said. Less anticipated was the pace and extent of data center load growth to power generative A.I. model training and use.

Deloitte estimates data centers will drive roughly 44 GW of additional demand by 2030. Meanwhile, 2.7 GW in demand from “direct air capture” plants may emerge by 2030.

“This multipronged demand, totaling more than 57 GW by 2030, is currently outpacing supply,” Motyka said.

The effect of resilience efforts

Supply chains are also affected by the utility industry’s efforts to upgrade grid systems to be more resilient, according to the U.S. Department of Energy’s (DOE) Office of Electricity.

“While such work is necessary, grid buildout, replacement and reliance efforts are putting strain on the supply for critical grid components, including transformers,” according to DOE spokespeople.

Utilities seeking to add or replace transformers and other grid components are currently facing high prices and long lead times, resulting in delayed projects and economic losses, according to the spokespeople.

Transformer shortages

“Grid component manufacturers also report labor shortages and challenges finding critical components, such as electrical steel,” they said. “Supply chain challenges have the potential to seriously affect energy accessibility, reliability and affordability.”

Indeed, lead times for procuring transformers increased from around 50 weeks in 2021 to 120 weeks on average in 2024, reaching up to 210 weeks for larger units, Motyka said. Other disruptors to the power supply chain include effects from extreme weather events and trade policy uncertainty.

When there is a shortage of critical components, utilities can become competitors, further increasing supply chain pressures, according to the DOE’s spokespeople.

“Cost, quality of workmanship and availability become driving factors for utilities when they need to purchase components,” they said. “While some utilities have worked together with respect to purchasing orders, other utilities purchase what they can, when they can.”

During natural hazards, many utilities have mutual assistance agreements to access equipment and supplies during catastrophic periods, reducing the time it takes to restore power to customers, they said.

“Purchasing equipment from foreign countries is commonplace,” the spokespeople said. “And some equipment, such as certain types of large power transformers, can only be purchased overseas.”

Reshoring efforts

Utilities and renewable energy companies also are mitigating lead times and other supply chain bottlenecks by pursuing strategic reshoring joint ventures with domestic manufacturers of components such as solar panels and critical minerals, Motyka said. Still another way is recovering and reusing materials.

“Clean energy manufacturers are developing end-of-life management and recycling of solar panels, wind blades, batteries and electrolyzers to reduce waste and recover critical minerals,” she said. “Battery-metal recycling startups raised record funding over the past couple years and received DOE Loans Program Office conditional loan commitments. These projects could help address critical mineral shortages.”

The DOE is taking a multipronged approach to collaborating with utilities and grid manufacturers to mitigate supply chain challenges, including investing billions of dollars into domestic energy manufacturing, critical materials processing and workforce training, the spokespeople said. 

The department is also supporting the domestic development of innovative energy solutions to minimize dependence on “foreign entities of concern.”

Moreover, the DOE, along with the Energy Sector Coordinating Committee, have met with industry representatives to brainstorm ways to address the distribution transformer shortage. This effort looked at reducing the estimated 80,000 different types of distributions through a common configuration matrix. The group also identified recommendations for the interchangeability of accessories should original components be unavailable.

Utilities could take advantage of next-generation technology breakthroughs such as “flexible transformers,” which are supported by the Office of Electricity in partnership with the National Labs and DOE programs such as the Grid Resilience and Innovation Partnership Program. 

“DOE is working diligently to ensure that the nation’s electricity grid not only continues to be reliable, resilient and affordable, but also made in America,” the agency’s spokespeople said. “DOE’s Office of Manufacturing and Energy Supply Chains has already made critical investments in electrical steel, low-voltage switchgear, circuit breakers, three-phase transformers and, most critically, large power transformers.”

Reshored cleantech plants are reshaping solar panel and battery storage supply chains, and A.I. is increasingly being leveraged to optimize these supply chains, according to Motyka.

“U.S. policymakers share industrial policy goals of strengthening economic competitiveness, national security and resilience,” she said. “The strategic cleantech manufacturing industry may continue to play a critical role in advancing these goals.”

Overall investment in cleantech reached a record $71 billion in the third quarter of 2024. Quarterly records in the retail and manufacturing segments drove the overall record, despite tax guidance uncertainty and other factors that contributed to some project delays. Most of the announced projects have not yet broken ground, and 60% are slated to begin operations during the next four years.

Protection of reshored industry will likely translate into continuation of the tariffs imposed in 2024 on solar and batteries, Motyka said.

“U.S. industrial policy is also building on multiple Congressional initiatives to measure the carbon intensity of industrial products, including solar panels and wind turbines to leverage the U.S. carbon edge in trade policy,” she said. “Such measurement paved the way for carbon border adjustable tariffs in the European Union.”

In 2025, U.S. manufacturers will also be able to obtain $6 billion in additional qualifying advanced energy project tax credits with the federal 48C program to increase domestic sourcing, according to the DOE. 

The additional tax credit incentives will also encourage manufacturers to site facilities in communities with closed coal mines or coal plants, meet prevailing wages and encourage apprenticeship programs.

“Through these and other programs, DOE hopes to encourage partnerships with and across the private sector to ensure the U.S. government and private sector partners have a common understanding of supply chain challenges, allowing industry and DOE to jointly work towards solutions,” the spokespeople said.

Transparency is essential, as the DOE can lack visibility into new and emerging grid component bottlenecks, they said.

“Identifying the next component shortage before it becomes a major issue can be of immense help and requires partnership and insights from utilities and manufacturers,” according to the spokespeople. “Participation in DOE advisory committees, supply chain tiger teams and timely response to requests for information have been extremely helpful to the DOE in the past. Continued partnership between the public and private sector is essential to any national supply chain strategy.”

Golib Tolibov / dmitrymirror / Attasit / stock.adobe.com