Friday, May 24, 2024

Electrification Bottleneck: Transformers

  • The heart of the transformer is the core coil assembly. So, it's the piece that takes the high voltage and it converts it to a lower voltage. So, you have a coil winding that's slowly bleeding off the energy. I guess, that's the best way that I would describe it. And then, you have an electrical steel core that surrounds that coil, to help generate the drop in voltage. It's a very specialized steel. And in the United States, there's literally one manufacturer that makes grain-oriented steel, and that's Cleveland-Cliffs. And their plant is essentially operating at a hundred percent capacity, it's at a hundred percent output. And so, the ability to get more grain-oriented steel into the transformer market is challenged. Now, there's foreign sources of steel as well, and I know a lot of my competitors are using foreign sources of steel. It cost for that one up, right? There was tariffs put in place in order to, I don't know, protect the market. I don't know why the tariffs were put in place, but there are foreign sources of steel. And then, of course, there's an alternate material that is becoming talked about a lot more in the industry, and that's amorphous steel. And again, similar to grain-oriented, only one manufacturer of that in the United States. So, it's a pretty risky supply chain when it comes to the inner workings of a transformer. [link]
  • The NREL team is the first to quantify the number, capacity, age, and use of the nation’s current transformer stock. This was no small feat, as the nation’s transformers are owned by over 3,000 municipal, cooperative, and investor-owned utilities. About 20% of transformer capacity is privately owned by large commercial and industrial customers, according to the report authors. The study found that utilities are experiencing extended lead times for transformers of up to two years (a fourfold increase on pre-2022 lead times) and reporting price increases by as much as four to nine times in the past 3 years. According to the researchers, the increased demand is due to increased electrification, increased clean energy going to the grid as well as an aging electric infrastructure that needs replacement. Preliminary analysis estimates that overall stock capacity needs to grow 160% to 260% by 2050, compared to 2021 levels to meet increasing energy demands across residential, commercial, industrial and transportation sectors. [link]
  • Given that it can take decades for transformer manufacturers to break even, many are reluctant to make the investments required to expand production. The same manufacturers that acquired the technology and financial capital in the 1980s, are enjoying full production slots and higher margins because of increased global demand. In turn, this limits their motivation to expand and risk financial instability. [link]
  • Prolec GE, a subsidiary of the U.S. manufacturer's joint venture with Mexico-based Xignux, said in mid-December it will spend $85 million in a new factory in Monterrey, Mexico to meet North American demand for single phase pad-mount transformers. Construction is expected to begin this year with operation in 2025. The joint venture also announced this year an estimated $29-million expansion of a plant in Shreveport, La. to build more transformers for wind and solar energy projects that will be at full capacity by June. “I applaud Prolec GE for recognizing the business growth opportunity presented by the shift to cleaner fuel sources,” Louisiana Gov. John Bel Edwards (D) said. The expanded facility is located in the congressional district of House Speaker Mike Johnson (R-La.), who has been been a critic of added federal clean energy funding. There also is speculation that other leading global manufacturers such as Germany-based Siemens AG could ramp up U.S. transformer capacity. "There's never been a better time to invest in critical electrical infrastructure and green mobility to support the backbone of America's economy," said Roland Busch, Siemens president and CEO, in announcing new investment last year in U.S. battery plants, semiconductor facilities and electrical vehicle charging. [link]


CP said...

Hammond Power Solutions (HMDPF)
"offers a variety of dry-type transformers, filters, and reactors"

Electrical Infrastructure Stocks

First Trust NASDAQ® Clean Edge® Smart Grid Infrastructure Index Fund (GRID)
has many of the above, plus

CP said...