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How the Biden Regulatory Agenda Could Make a Looming Crisis Much, Much Worse


America has been fortunate this year to have thus far avoided the landfall of a highly disruptive major hurricane that knocks out power across vast geographic areas, like Hurricane Harvey did in 2017. The few storms that have made landfall in this hurricane season, like Hurricane Idalia, which hit Florida in late August, have had impacts comparatively limited in scope and scale.

With any luck, this fortunate trend will continue through the rest of this hurricane season since an ongoing supply chain crisis related to power transformers would dramatically complicate recovery efforts from a devastating storm like Harvey or 2005’s Hurricane Katrina. Transformers, which function to change the current and voltage on an electric line, are integral to every power transmission line in existence. They are especially vulnerable to being damaged during major storm events due to power surges, lightning, and other factors.

Transformers had already become difficult to source, resulting in lower-than-normal inventories prior to 2020, but the supply chain issues grew into a crisis during the Covid pandemic. The situation today is so dire that anticipated lead times to source some high-capacity transformers are expressed not in terms of weeks or months, but in years, with some now taking as long as four years to acquire.

Early this year, DOE issued a notice of proposed rulemaking (NOPR) that would mandate new efficiency standards for transformers right in the midst of a supply crisis.

The U.S. power industry has warned policymakers about this continuing transformer crisis and requested action on it for years now, but the government has steadfastly failed to act in a meaningful way. The Biden administration did issue a presidential determination in June 2022 through the Defense Production Act (DPA) to prioritize the domestic production of transformers to bolster grid resiliency and national security. The power industry responded with some recommendations on actions that could be taken to improve the situation, but little progress has been made.

Incredibly, regulators at the Biden administration’s Department of Energy are now in the process of moving a new proposed regulation that would inevitably make the problem far worse. Early this year, DOE issued a notice of proposed rulemaking (NOPR) that would mandate new efficiency standards for transformers right in the midst of a supply crisis.

In a letter sent to Senior Presidential Advisor John Podesta dated September 20, the National Electrical Manufacturers Association (NEMA) joined a group including five major business associations in an appeal to the White House to prevail on DOE to reconsider its action. In the letter, the authors note that the transformers in question already function at an amazing 99.53% to 99.55% efficiency, rendering any increase in efficiency by a new regulation essentially meaningless.

So what’s the big deal, you might be wondering? Well, there are several. First, as NEMA and the other associations point out, “due to the intricate ways transformers are designed and assembled, increasing their efficiency even by a fraction of a percentage point could add months to an already lengthy order cycle.” These are added months the U.S. electric grid cannot afford.

Second, the letter notes, “the proposed rule would require manufacturers to transition to a different type of steel, which is largely untested, less flexible, and more expensive.” Third, the associations point to the reality that “the existing supply chain of this alternative steel is very limited and mostly foreign-sourced.”

What it all amounts to is the reality that this new rule would force manufacturers to do far more than re-jigger a few minor parts of their process; it would in fact require wholesale changes that could take years to implement. This is, in a word, crazy. It is a classic regulation for regulation’s sake move by DOE, one that will produce little, if any tangible benefit, but which has the potential for turning an ongoing supply chain crisis into a major grid disaster.

The associations conclude their letter by saying, “Given the unprecedented demand for distribution transformers, our organizations urge DOE to maintain the current efficiency levels required of these products. Getting these already highly efficient products into the market faster should be the highest priority and will result in the realization of electrification benefits much sooner—benefits that will far outweigh any gains achieved through a fractional percentage increase in efficiency.”

They aren’t wrong.

David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.

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