With the push to electrify everything from cooking appliances to cars, utility planners are beginning to increase attention on distribution transformers. These trashcan-sized fixtures are common sights atop street-side utility poles and are the connecting point between utility grids and customers. (They also appear as innocuous green or gray metal boxes in areas served by underground lines.) To maximize their performance, the U.S. Department of Energy (DOE) has proposed new efficiency standards it says could save consumers billions on their monthly utility bills over the next several decades.
But for utilities, the more immediate problem is simply finding enough of these vital devices to meet current needs. Shortages of today’s models have sent replacement costs soaring and created unsustainable wait times at a point when many are aging out of their useful lifespans. This shortfall comes at the time when electric vehicle ownership is rising, with the possibility of greater dependence on power flowing back through transformers from on-site customer resources to help balance grid operations.
Distribution transformers step down voltages for the power being delivered to homes and businesses, with a single unit typically serving several nearby customers. They’re getting more attention these days as distributed energy resources like rooftop solar panels and battery storage systems, along with EVs, are becoming more prevalent. In the future, transformers will more frequently need to support bidirectional power flow as more customers send power back from their own systems to support grid operations.
With these added responsibilities and greater power flows—when, say, multiple connected EVs are charging at once—utilities may need to add more transformers to support these new operations. Replacing units is becoming a priority for grid operators as existing stock, with an average lifespan of 25–40 years, is aging quickly. The American Society of Civil Engineers estimated that 75% of the nation’s power transformers (including larger, substation-based units) are at least 25 years old.
As utilities look ahead at how to best handle their aging fleet, the DOE has announced standards to help ensure the next generation of equipment operates more efficiently. Reducing the energy wasted as heat as electricity passes through transformers could make a cumulative improvement in system efficiency and reduced cost, the agency said. Given the large number of transformers throughout every utility’s system, even small efficiency boosts could lead to savings of up to $15 billion over 30 years.
What the guidelines mean
The new guidelines would shift the industry to transformers with amorphous steel cores, which DOE says are “significantly more efficient” than those with grain-oriented steel, which now dominate the market. The proposed timeline would see the new rule come into effect in 2027.
DOE estimates energy savings related to the regulation’s implementation would reduce U.S. CO2 emissions by an amount “roughly equivalent” to the annual emissions from 90 coal-fired power plants over the next 30 years. Utilities could get assistance in purchasing compliant units through two rebate programs introduced in the 2022 Bipartisan Infrastructure Law for distribution transformers and “extended product systems” now being finalized.
That financial assistance will likely be needed, given the dramatic rise in prices for transformers since 2020. Costs have doubled or tripled since then, according to American Public Power Association figures. These price hikes are the result of product shortages that are beginning to have real effects on grid construction and improvement efforts. Wait times that might have been three months in 2020 have risen to more than a year. Many utilities have gone through their stockpiles, putting operations at risk in case of natural disasters and outages.
Part of the problem is the lack of strong U.S. transformer manufacturing capacity. Those makers are seeing the same labor and materials challenges other industries have faced in the last several years.
In June 2022, President Biden invoked the Defense Production Act (DPA) to help build new capacity for transformers, along with several other energy-related technologies. The order notes the current reliance on foreign suppliers—for example, there are no U.S. manufacturers of the grain-aligned steel used in current-generation products—and the nation’s growing need to expand transmission systems dramatically to meet electrification goals.
A consortium of electric utility associations and homebuilder groups wrote to the U.S. House and Senate in November requesting $1 billion to help implement Biden’s DPA order. In December, a group of nine Democratic House members called on leaders from the House and Senate Appropriations Committees to boost that aid to $2.1 billion, suggesting it come from disaster supplemental funding.
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