Almost all distribution transformers produced or imported into the U.S. could require amorphous steel cores starting in 2027 under new energy efficiency standards proposed by the Department of Energy (DOE). The measure, unveiled as industry grapples with a crippling shortage of distribution transformers, will serve a longer-term role in boosting grid resiliency as a “strategic step to advance the diversification of transformer core technology,” the agency said.
The DOE’s 448-page proposed rule issued on Dec. 28 seeks to reduce losses in three types of distribution transformers—liquid-immersed, low-voltage dry-type (LVDT), and medium-voltage dry-type (MVDT) distribution transformers—through specific percentage-based energy efficiency standards.
While broader and more stringent than existing distribution transformer energy efficiency standards that were finalized in April 2013 (and which have applied to units manufactured after January 2016), the DOE’s proposed standards will apply to units manufactured in, or imported into, the U.S. starting in 2027, three years after the rule is finalized, likely in 2024.
The agency, however, acknowledged achieving the new standards will require addressing near-term supply chain challenges. But if finalized, they could potentially improve the resiliency of the U.S. power grid, slash utility bills, and dramatically reduce domestic carbon dioxide emissions, it said.
According to the proposal, the brunt of the new measures will be carried by manufacturers of the three categories of distribution transformers, as well as by purchasers of distribution transformers, which vary. Medium-voltage liquid-immersed distribution transformers are typically purchased by electric utilities, while consumers for low- and medium-voltage dry-type distribution transformers are typically commercial and industrial entities.
In order to bring products into compliance with the new proposed standards, the DOE estimates industry would incur total “conversion costs” of about $271 million for liquid-immersed distribution transformers, $69.4 million for LVDT distribution transformers, and $3.1 million for MVDT distribution transformers.
Distribution Transformers Covered by the Rule
Compared to power transformers, typically used in transmission networks of higher voltages and for step-up and step-down applications and are generally rated above 200 MVA, distribution transformers are used for lower-voltage distribution networks as a means of end-user connectivity. “A common sight on utility poles in neighborhoods throughout the country, these transformers lower the voltage of electrical power before distribution to the customer,” the Department of Energy (DOE) noted on Dec. 28.
Current efficiency standards apply to liquid-immersed, low-voltage dry-type, and medium-voltage dry-type distribution transformers. The DOE’s proposed rule would amend the energy conservation standards for all three categories.
Under federal code (10 CFR 431.192), a distribution transformer has an input voltage of 34.5 kV or less, an output voltage of 600 V or less, and is rated for operation at a frequency of 60 Hz. It may have a capacity of 10 kVA to 2,500 kVA for liquid-immersed units and 15 kVA to 2,500 kVA for dry-type units. The definition excludes other categories of transformers, such as autotransformers, drive (or isolation) transformers, grounding transformers, and others.
Federal code, meanwhile, defines a liquid-immersed distribution transformer as a distribution transformer in which the core and coil assembly are immersed in an insulating liquid. A “low-voltage dry-type (LVDT) distribution transformer” is defined as a distribution transformer with an input voltage of 600 volts or less and where the core and coil assembly are immersed in a gaseous or dry-compound insulating medium. A “medium-voltage dry-type (MVDT) distribution transformer” is a distribution transformer in which the core and coil assembly are immersed in a gaseous or dry compound insulating medium and has a rated primary voltage between 601 V and 35 kV.
DOE: Standards Needed to Ensure Efficient, Inexpensive Operation of Distribution Transformers
The DOE is leaning on the Energy Policy and Conservation Act (EPCA) for its authority to prescribe the new standards. Amended in 1992, the EPCA allows the DOE “to prescribe energy conservation standards for those distribution transformers for which DOE determines such standards would be technologically feasible, economically justified, and would result in significant energy savings,” the agency said.
However, Energy Secretary Jennifer Granholm said the rule was necessary to ensure distribution transformers, a “critical component” of the U.S. electricity system, would operate “as efficiently and inexpensively as possible.” Modernizing the components’ energy conservation standards would “enhance the resilience of our nation’s energy grid and make it possible to deliver affordable electrical power to consumers in every corner of America,” she said on Wednesday.
If finalized, the new standards “would reduce U.S. CO2 emissions by 340 million metric tons over the next 30 years—an amount roughly equal to the annual emissions of 90 coal-fired power plants,” the DOE said on Wednesday. They could also “generate over 10 quads of energy savings and approximately $15 billion in savings to the nation from 30 years of shipments.”
Serious Supply Chain Considerations
However, achieving the standards and effectively reducing distribution transformer losses will require an overhaul of the makeup of essential distribution transformer components, the DOE acknowledged.
Over the last decade, for example, high-permeability steels have become more common in the distribution transformer industry. These include four grain-oriented electrical steel (GOES) categories—M-grades, hib, dr, and pdr—as well as certain categories of amorphous steel.
The proposed standards, notably, would require almost all transformers to feature amorphous steel cores, “which are significantly more energy efficient than those made of traditional, grain-oriented electrical steel,” the DOE said.
“Amorphous steel is a type of electrical steel that is produced by rapidly cooling molten alloy such that crystals do not form,” the DOE explained. “The resulting product is thinner than GOES and has lower core losses, but it reaches magnetic saturation at a lower flux density.” The DOE identified three categories of amorphous steel as possible technology options. These include “am” (traditional amorphous steel), “hibam” (high-permeability amorphous steel), and “hibam-dr” (high-permeability, domain-refined amorphous steel).
Procuring adequate supplies of amorphous steel to ensure industry will meet the standards is already a concern, however. GOES is available from multiple suppliers, although not necessarily domestically, and the traditional ‘am’ product is available from several global suppliers. “However, the higher-permeability ‘hibam’ product is available only from a single supplier,” the DOE noted.
A Complex Supply Chain Landscape
Supply chain issues, among other factors, have already compounded a general shortage of distribution transformers. In late November, several trade groups implored the DOE to prioritize Defense Production Act (DPA) authority from the Inflation Reduction Act (IRA) for transformers. Supply issues have prompted many utilities to defer or cancel infrastructure projects because they are unable to procure the additional distribution transformers required for these projects, they said. “Among public power utilities, one in five projects were deferred or canceled,” said the American Public Power Association (APPA).
On Dec. 20, APPA lamented that the $1 billion of funding trade groups had requested to ramp up production of distribution transformers through the DPA was not included in the Dec. 19 omnibus appropriations bill, which President Biden signed into law on Dec. 29. “This is a critical issue that several industries have raised, and on which the president has called for action. Despite our collective pleas over the past year to address this issue, supplies continue to dwindle, demand far outpaces production, and if action is not taken in the near term, the U.S. will face electric reliability concerns,” said APPA President and CEO Joy Ditto.
Reliability considerations posed by a scarcity of distribution transformers are highlighted by the North American Electric Reliability Corp. (NERC) in its latest Winter Reliability Assessment. The nation’s designated Electric Reliability Organization (ERO) said that the electricity industry is facing a shortage of distribution transformers “as a result of production not keeping pace with demand.”
At the same time, several distribution transformer manufacturers have voiced growing concerns about competition for steel supplies. In recent comments to the DOE, Schneider Electric said that power transformers and medium-voltage distribution transformers tend to be prioritized over the needs of the LVDT market. The company suggested supply issues could exist if LVDT manufacturers need to purchase the same core steel as medium-voltage distribution transformers.
Powersmiths, another manufacturer, in comments, said it is experiencing diminished availability of several grades of steel and increased costs. The company suggested steel suppliers are shifting to serving the electric vehicle market “without plans to bring transformer-grade steel capacity back.”
But according to the DOE, the Biden administration has already taken steps to address these challenges. Work is underway to “address near-term supply chain challenges and strengthen domestic manufacturing of key components in the electric grid,” the agency said on Wednesday.
“In June, President Biden invoked the Defense Production Act to accelerate the domestic production of clean energy technologies, including distribution transformers and grid components. In October, DOE issued a Request for Information to gather additional public input to determine how to maximize the impact of these new authorities. The comment period closed on Nov. 30, and DOE is carefully considering the information submitted,” it said.
“Additionally, as the supply of traditional, grain-oriented steel tightens, DOE is focused on diversifying domestic steel production where capacity can be expanded, such as in the production of amorphous steel used in advanced transformers,” the agency added. “In support of these efforts, DOE is also finalizing the implementation guidance for the distribution transformer and extended product system rebate programs established by the Energy Act of 2020 and funded by President Biden’s Bipartisan Infrastructure Law. This rebate program encourages the replacement of energy-inefficient distribution transformers and extended product systems with more-efficient replacements.”