WASHINGTON, D.C. (DOE) — The U.S. Department of Energy today finalized congressionally-mandated energy efficiency standards for distribution transformers to increase the resiliency and efficiency of America’s power grid, support good-paying, high-quality manufacturing jobs, and accelerate the deployment of affordable, reliable, and clean electricity around the nation. These updated standards—which include a longer compliance timeline of five years—will allegedly save American utilities and commercial and industrial entities $824 million per year in electricity costs, and result in more demand for core materials like grain-oriented electrical steel (GOES). Following a proposed rule issued last year, DOE adjusted these final standards based on extensive stakeholder engagement to ensure continued growth opportunities for domestic steel production and provide a longer compliance timeframe of five years.
“Today’s actions reflect DOE’s deep commitment to developing forward-looking solutions that align with President Biden’s industrial policy goals, including creating good-paying jobs, strengthening domestic manufacturing, and helping American workers capture the economic benefits of our clean energy economy,” said U.S. Secretary of Energy Jennifer M. Granholm. “The regulatory process can work, and this final rule shows just that by reflecting feedback from a broad spectrum of stakeholders. Ultimately, it will be a piece of the solution, rather than a barrier, to help resolve the ongoing distribution transformer shortage and keep America’s businesses and workers competitive.”
“Pennsylvania is a national energy leader, and the skilled workers at Cleveland Cliffs in Butler County know how to build the transformers that power our nation’s critical infrastructure,” said Pennsylvania Governor Josh Shapiro. “I engaged directly with Secretary Granholm and the Biden Administration to ensure Pennsylvanians’ concerns about the proposed rules were heard, and I want to thank them for making sure the final rule will allow for Butler Works to continue its existing line of steel production in Western Pennsylvania, while supporting upgrades that will help spur innovation, protect jobs, and reduce carbon emissions from the plant. As a result, we have saved thousands of union jobs at the Cleveland-Cliffs Butler Works facility, meaning those workers are going to continue to be able to put food on the table and to prosper here in Pennsylvania. Here in the Commonwealth, we know the hardworking Pennsylvanians in the energy sector are critical pieces of our economy—and we’re grateful to the Biden Administration for this commitment to protecting and creating energy jobs, while creating a more efficient, cost effective, and reliable grid in the long term.”
The updated final standards can primarily be met with GOES, the majority of which will be manufactured in the United States, and a small segment of the market will be met with amorphous alloy, also expected to be manufactured in the United States. Distribution transformers convert high-voltage electricity from power generation sources to levels safe enough to be utilized by homes and businesses. Over 60 million distribution transformers are mounted on utility poles and pads across the nation—operating 24 hours a day, 365 days a year, and remaining in use for many decades. Improvements to their efficiency will reduce wasted energy on the power grid and provide significant energy savings to the nation. Over 30 years, the new standards are expected to save Americans over $14 billion in energy costs, while also reducing nearly 85 million metric tons of dangerous carbon dioxide emissions—equivalent to the combined annual emissions of nearly 11 million homes. The energy savings over 30 years of shipments is 4.6 quadrillion British thermal units, which represents a savings of 10% relative to the energy use of products currently on the market.
These standards are expected to protect the existing domestic supply of core materials used in distribution transformers, increasing resiliency in the distribution transformer supply chain, while preserving steel union manufacturing jobs in Pennsylvania and Ohio. The GOES production at these same locations will also benefit from DOE’s recent $75 million grant, as part of President Biden’s Investing in America agenda, for furnace upgrades to slash carbon emissions, which are expected to make U.S. domestic GOES amongst the lowest emission GOES in the world.
While the initial proposal would likely have represented about a 95% market shift to amorphous alloy, under today’s final rule about 75% of the market will be able to achieve the standards with GOES. The final rule also extends the compliance timeline from three years to five years. These changes are responsive to stakeholder concerns about the feasibility challenges presented by the proposed efficiency levels, including the magnitude of anticipated workforce reskilling. Today’s final rule gives manufacturers more flexibility to meet modest efficiency increases as distribution manufacturers prepare existing and develop new manufacturing lines to increase the nation’s total distribution transformer manufacturing capacity.
Transformers are crucial components in grid modernization and are increasingly needed for stepping down power for electric vehicle chargers. A recent study by the National Renewable Energy Laboratory (NREL) projects a tripling of distribution transformer installations by 2050. These adopted standards balance the supply chain concerns of installation increases, while making significant strides in efficiency gains of these units. The efficiency standards being adopted today for distribution transformers—which include liquid-immersed, low-voltage dry-type, and medium-voltage dry-type equipment—consider feedback from a diverse set of stakeholders, including manufacturers, the manufacturing trade association, union workers, energy and environmental advocacy groups, state officials, and utility organizations and companies.
In addition to updating these energy efficiency standards as directed by Congress, DOE is also leading government and private sector convenings to address near-term supply chain challenges for distribution transformers and other key components in the electric grid. This has included elevating potential programmatic and resources across government, including not only existing R&D programs, but programs within the historic Bipartisan Infrastructure Law that can improve supply chain and enhance grid resilience.
In response to today’s announcement from the Department of Energy, Debra Phillips, President and CEO of NEMA, made the following statement:
NEMA is reviewing the Department of Energy’s (DOE) final rule on distribution transformer efficiency in depth and through the multiple lenses of grid reliability, supply chain resiliency, and energy efficiency. Our nation’s ability to meet growing demand for electricity relies on a readily available supply of distribution transformers. DOE’s January 2023 proposed rule was unnecessary and burdensome, and we appreciate that the Biden Administration and DOE have been engaged with electrical manufacturers throughout this regulatory process.
For more than a year, NEMA and our broad coalition of manufacturers, utilities, homebuilders, EV suppliers, steel suppliers, and organized labor have highlighted ways to address the shortcomings of the proposed rule and to focus on the actions needed to deliver long-term certainty and practical efficiency gains. While at first glance, this final rule appears to be a significant improvement on what was originally proposed, we remain concerned that the rulemaking may exacerbate supply chain challenges and long lead times for these critical grid components. Electrical manufacturers value DOE’s constructive engagement on this rule, and we are eager to find solutions that deliver the Administration’s electrification and decarbonization efforts.
NAHB released the following statement:
Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kan., issued the following statement after the Department of Energy issued its final rule regarding new energy efficiency standards for distribution transformers:
“NAHB commends the Department of Energy for listening to the concerns of home builders who cited soaring costs and shortages of distribution transformers that are delaying housing projects across the nation and increasing construction costs. The final rule issued today represents an improvement over what was initially proposed and should deliver practical efficiency gains without further exacerbating ongoing supply challenges in the distribution transformer marketplace. We urge the administration and Congress to now shift its focus toward addressing ongoing distribution transformer supply shortages that are hampering the ability of builders to bring much needed housing to the market.”
tED magazine will continue to monitor association responses and will add them to this page if they become available.
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