2 days ago by Devin Partida

Wind turbine nacelle interior. Image used courtesy of Adobe Stock

Transformer Shortage Causes

A National Renewable Energy Laboratory (NREL) study reveals how severe the transformer shortage has become. Some transformers now face two-year lead times—a fourfold increase over pre-2022 averages—and prices four to nine times higher than the previous three years. These concerns may become more extreme, as NREL expects transformer capacity demands to rise by 160% to 260% over 2021 levels.

This shortage stems from several related factors. First and most notably, the power sector is still trying to catch up to pent-up pandemic-era demand. As construction slowed at the height of social distancing concerns and economic cutbacks, the industry could not produce and install new transformers. Now that global electricity demand is reaching pre-pandemic levels, these backlogs have grown faster than manufacturers’ ability to recover.

Supply chain issues have exacerbated the shortage. Aluminum, copper, and other metals face supply volatility amid rising electronics manufacturing. Many materials also come from regions with sustainability or sociopolitical concerns. Manufacturing labor shortages and general supply chain disruptions have hampered productivity, further extending lead times.

Impact on Renewable Energy

Renewable projects have faced mounting difficulties as transformer prices and lead times have skyrocketed. Large-scale battery projects for wind and solar installments now take 12 to 18 months to complete, roughly six months longer than usual.

Installing renewable infrastructure is also becoming increasingly challenging. Many utility companies rethink their priorities due to rising prices and limited material availability. Renewables, often more expensive to implement, are an easy target for cutbacks amid these constraints.

These tightening budgets and stricter approval measures are more impactful in light of the sector’s recent growth. The Inflation Reduction Act (IRA) had previously increased renewable demand by providing more economic incentives. Similarly, the White House planned to build 500,000 electric vehicle chargers along U.S. highways.

These previous demand drivers mean the sudden spike in prices and lead times is more disruptive by comparison. Even though transformer issues affect the energy industry as a whole, the once-fast-growing renewable segment experiences the brunt of the downturn.

How the Renewable Energy Sector Can Respond

While the transformer shortage is challenging, all is not lost for the renewable energy sector. One promising solution is to pivot to recycled transformers rather than relying on new equipment. Roughly 99% of transformer materials are recyclable or reusable. Consequently, renewable projects could restore old hardware to overcome availability gaps and long lead times.

Supply chain restructuring can also help, especially in the long term. Sourcing from domestic transformer suppliers instead of international companies can shorten lead times and reduce the likelihood of logistics delays. This may entail higher initial costs, but the resulting payback from faster renewable growth will compensate for it over time.

Automation and workforce reskilling programs can help domestic manufacturers ramp up their capacity. This shift may take additional public-private partnerships and other forms of government support. While these steps will take time to produce meaningful results, organizations must pursue them now to ensure they can meet future demand.

Renewables Are Growing, but Challenges Remain

Renewable energy is finally reaching a point where it can compete with fossil fuel electricity sources. This shift is crucial for the fight against climate change, but it is not guaranteed. The industry must recognize its most pressing challenges and adapt accordingly to make the most of this opportunity.

Overcoming the transformer shortage is key to sustained renewable energy growth. Significant challenges remain, but change is possible if organizations know where to start.