In 2020, as the COVID-19 pandemic disrupted the global economy, many industries faced challenges and shutdowns. However, ERMCO Inc., a Tennessee-based manufacturer of electrical transformers, experienced record-breaking sales and production. While other manufacturers struggled with supply chain issues, ERMCO’s facilities in various states continued to meet demand. CEO Tim Mills stated that 2021 surpassed the previous year’s record sales.
Despite the booming demand, ERMCO is facing a shortage due to a new energy-efficient regulation for transformers. This shortage has led to delays in construction projects, increased costs for replacing power lines, and a potential slowdown in the transition away from fossil fuels. Transformers, which come in various shapes and sizes, are essential for converting high voltages into safe levels for homes and businesses.
Previously, the demand for transformers aligned with new housing construction. However, with the increasing frequency of extreme weather events causing transformer damage and the need to upgrade the power grid to accommodate renewable energy sources, the demand has outpaced the supply. Additionally, the rise in electric vehicles and electric-powered appliances will further increase the demand for transformers.
Both the Trump and Biden administrations have recognized the transformer shortage issue. While Mills wants to increase production, the uncertainty surrounding the upcoming regulation makes it difficult for him to invest in new assembly lines. The proposed new standards would require transformers made from a different kind of steel, promising energy savings but potentially exacerbating the current shortage.
Experts suggest that addressing the transformer shortage requires more than abandoning the regulation. Hiring and training more workers and establishing a government-controlled stockpile of transformers could help alleviate the issue. The situation is expected to worsen if the demand continues to grow without adequate supply.
The transformer market heavily relies on imports from countries like China, and utilities across the United States are facing longer lead times, price pressures, and depleted stockpiles. Blackouts have become a more common occurrence, with the average American household experiencing longer periods without power compared to previous years.
ERMCO aims to meet the skyrocketing demand by expanding its production facilities. However, the decision on how much space to allocate to current transformers made with grain-oriented electrical steel is uncertain, considering the potential shift to amorphous electrical steel required by the new regulation.
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