For most of 2023 there has been a lively conversation in the electric utility industry about a notice of proposed rulemaking (NOPR) by the Department of Energy (DOE) for distribution transformers.
DOE last reviewed energy efficiency standards in 2013, and this most recent proposed efficiency increase requires the use of a different kind of steel for the transformer core, around which copper wire is wound to enable transformation from a higher to a lower alternating-current (AC) voltage.
This might not be such a big issue, had our world not started down the path of de-globalization. Grain oriented electrical steel (GOES), which is used today for transformer cores, is limited in supply, with the sole North American supplier being Cleveland Cliffs, at the former AK Steel Butler Works near Pittsburgh. The proposed efficiency standards, which would require incremental efficiency improvements that in absolute terms amount to single-digit percentages, effectively require a shift from GOES to an amorphous core type of steel. This product’s only North American supplier is Metglas, near Conway, South Carolina. The USMCA trade agreement, tariffs to protect domestic industry (and voters’ jobs), and supply chain disruptions have taken the focus off technological improvement and shifted it toward a bigger picture of energy security and the ability to meet policy goals of greater electrification.
The substantive arguments enter the realm of the esoteric and the rather dense 448-page DOE NOPR attempts to make the case for very small efficiency improvements having outsized global impacts. What is interesting is the subsequent response of the electric utility industry, which in the U.S. is made up of three different types of companies – investor-owned, municipal, and rural electric cooperative utilities. These three groups very often are at odds with each other in the public policy lobbying arena, with different investment priorities, strengths, and weaknesses. On this issue, however, they are unified in opposition to the NOPR (or at least its implementation timetable), to the point that the industry got together and took their concerns to the U.S. Senate. Time will tell whether a divided government can come together to square this technology vs. supply chain circle. The takeaway here: DOE’s case for incremental efficiency gains must also account for the de-globalized, constrained world we now find ourselves in. The alternative is more prescriptive legislation and narrower rulemaking (which is where we may be headed anyway, for other reasons – a topic for another day).