Is the Transformer Shortage Still Impacting Utility Contractors?
By Emily Newton
Transformers are crucial in any electrical system, but they’ve become increasingly difficult to obtain. Nationwide shortages started making waves throughout the utility industry in 2021, and attention has only grown since. Despite this rising sense of urgency from businesses and government agencies, the scarcity still impacts utility contractors in 2023.
Where Did the Transformer Shortage Come From?
The National Association of Home Builders (NAHB) brought attention to the transformer shortage starting in late 2021, though the underlying causes of this disruption began earlier. Factory shutdowns and supply chain delays at the height of the pandemic limited manufacturers’ ability to produce this equipment. Construction demand skyrocketed throughout 2020 and 2021, exacerbating this trend.
Many distribution-level transformers also come from overseas manufacturers, making them more prone to delays and related supply chain disruptions. Electronics manufacturing has started to trend toward reshoring, but there are still relatively few domestic suppliers. Labor challenges amid the great resignation also limit the ability to keep up with rising demand.
As these issues have compounded each other, finding transformers for reasonable prices or getting them in on time has become increasingly challenging. Factory shutdowns or occupancy restrictions may not limit production anymore, but manufacturers still face a considerable challenge catching up from earlier setbacks.
How Is the Transformer Shortage Impacting Contractors?
The transformer shortage started reaching these dramatic heights in 2021, but it’s still impacting utility contractors today. In a November 2022 letter to Congress, the NAHB and other electric and construction organizations emphasized the ongoing issues the scarcity still poses. Average lead times to procure a distribution transformer have risen 443% since 2020, with orders taking over a year to fill.
Transformer costs have similarly increased. Pad-mounted transformers in some areas now cost 400% more than they did in 2020. Amid these price hikes, utility contractors struggle to remain profitable or raise their prices to account for them, which can turn clients away.
Contractors also face project delays and cancellations amid this ongoing shortage, as they can’t complete an electrical system without these crucial components. These factors leave the utility contracting industry with the threat of lost business.
Clients may cancel or defer projects when they take too long to complete, yet this is beyond contractors’ control in many cases, as they face lengthy wait times for transformers. Some may also have to pass on potential projects because they can’t complete them in time or on budget. Others lose customers due to dissatisfaction with delays or high prices.
When Will the Shortage End?
The transformer shortage has lasted over a year and will likely linger for some time. Ironing out supply chain inefficiencies and reshoring manufacturing processes takes time, so even though these changes are underway, they won’t provide immediate relief.
Demand will likely keep surging, too. According to a 2020 government report, 70% of U.S. transformers are more than 25 years old. Even if new construction projects slow down, this aging infrastructure requires replacement and demand will continue.
It’s difficult to tell exactly how long these disruptions will last, but contractors should expect lingering effects to remain at least throughout 2023. Things may improve before then or could last longer, so staying on top of developing trends and erring on the side of flexibility is essential.
What Can Contractors Do Amid the Shortage?
Given these lingering transformer shortages, contractors must adapt to minimize losses and make the most of the situation. Here are a few steps that can help.
Repair and Refurbish Old Equipment
Due to rising prices and the limited availability of new equipment, some businesses have found that reusing old transformers can be cost-effective. Utility companies in some areas have removed hundreds of unused or underutilized transformers from their networks to repair them. These refurbished components can either support more buildings in their neighborhoods or find new use in developing communities.
Refurbished old transformers are less efficient than new equipment but more cost-effective in the short term. Some utility networks may already have access to these components, and even if they don’t, they can acquire them more easily than new ones.
Giving old transformers new life isn’t a long-term solution, but it can help meet demand and satisfy clients in the meantime. As supply chain tensions ease and new equipment becomes more accessible, contractors can replace these refurbished systems with newer gear.
Consider Alternate Transformer Types
Contractors should also consider other options when designing an electrical system for a project. Pad-mount transformers may be the industry standard for residential buildings, but they may also be harder to obtain in the current market. Using smaller, more accessible pole-mounted versions instead could provide some relief.
Unconventional transformer enclosures can help, too. Steel prices and availability play a large role in current shortages, so opting for wood or fiberglass instead can make it easier to come by this equipment.
As the shortage ends, contractors can return to these alternate setups and exchange them for more conventional alternatives. Pad-mount transformers are tamper-proof and weather-resistant, making them a better long-term solution for many buildings. However, for now, these unique setups can provide critical services while more orthodox options remain inaccessible.
Communicate With Stakeholders and Suppliers
Finally, keeping close contact with suppliers and other project stakeholders is important. Average multifamily building construction timelines have risen to 17.5 months in recent years and keep trending upward, so many clients and stakeholders expect lengthy projects. Contractors communicating the expected delays can manage expectations and avoid cancellations and business loss.
Similarly, contractors should communicate with transformer suppliers to understand developing trends that may alleviate or exacerbate the current situation. That way, they can respond faster and more appropriately to any changes.
Utility Contractors Must Adapt to Supply Chain Challenges
The ongoing transformer shortage poses some serious challenges to utility contractors. However, knowing where these disruptions come from and how to work around them lets them adapt to minimize the damage. Adjusting operations in the short term while promoting longer-term changes like reshoring and sourcing from multiple suppliers will help the industry overcome these obstacles.
Emily Newton is a construction and industrial journalist. She is also the Editor-in-Chief for Revolutionized Magazine. Keep up with Emily by following her by subscribing to Revolutionized’s Newsletter.
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