Elon Musk has been prophesying this for the last couple years. And here we are....
From Bloomberg, March 24:
A shortage of transformers is causing delays to power projects everywhere, holding trillion-dollar industries hostage—and that was before tariffs.
An explosion, a fireball and then darkness: Heathrow Airport uses as much energy as a small city, and when a major fire at a substation caused the power to fail late Thursday, the world learned how fragile our infrastructure can be. At the center of the chaos was a burning electrical transformer.
The transformer is rarely considered as a linchpin of today’s technologically interdependent world, let alone as a key to the even more electrified future. But it’s a device that’s essential to powering almost everything, and these days it’s not that easy to obtain. Replacing Heathrow’s charred transformer — or the countless others destroyed in storms, fire and floods on an increasingly volatile planet — will not see a quick fix. “There is a lead-time of over a year for a new transformer of this size,” says Conor Murphy, vice president of engineering at grid-technology firm Novogrid.
The astonishing Heathrow shutdown — leading to more than 1,000 canceled flights — traced back to a single point of failure is only the latest chapter of a story playing out all over the world. Without a transformer, projects of all kinds end up delayed with cascading consequences. In Europe, the shortage has throttled the buildout of cheap renewables, just as an energy crisis hit that caused electricity prices to spike.
In the US, the lack of transformers has slowed down recovery in the aftermath of extreme weather. It took seven months for businesses in the industrial corridor of eastern Tennessee hit by Hurricane Helene last year to resume their full power consumption.
At the other end of the state, meanwhile, transformers are causing headaches for tech companies that need new power-hungry data centers for artificial intelligence. The rise of a massive complex for Elon Musk’s xAI startup in Memphis, Tennessee, has forced a regional utility to go begging its peers for spare transformers to avoid delays.
Even comparably low-tech projects can end up hamstrung for want of a piece of equipment that’s been in widespread use for more than a century. In Houston, a project to construct 16 duplexes, where young adults fresh out of foster care move in and learn to live independently, spent a year and a half on hold before reaching completion last June. The cause was a missing transformer.
“You can’t build on a generator,” says Carole Brady, executive director of nonprofit HomeAid Houston. “It was holding up aid to young adults who were literally in trouble.”
The Covid-19 pandemic strained many supply chains, and most have recovered by now. The supply chain for transformers started experiencing troubles earlier — and it’s only worsened since. Instead of taking a few months to a year, the lead time for large transformer delivery is now three to five years. Among a basket of 47 goods needed to build grid infrastructure, transformers have seen the greatest increase in price — a near doubling since 2018, according to JPMorgan Asset Management.
“We are trying to solve for the unknown constantly,” says Kevin Doddridge, chief executive officer of Mississippi’s Northcentral Electric Cooperative. It was his company that helped out another utility in a pinch to accommodate the xAI data center, trucking spare units 60 miles south to Tallahatchie Valley Electric Power Association.
Transformers change voltage and make electricity safe to use. They can be as small as a household trash can or as large as a shipping container. They dot the landscape of every part of the inhabited globe, even in most places with insufficient access to electricity. Most people ignore them. Yet when it comes to making the grid work, these janky metal boxes with odd-shaped ceramic parts jutting out are as irreplaceable as electrical cables.
A bottleneck around the global supply of transformers spells trouble for sustaining infrastructure we have, from airports to homes, and for expanding emerging technologies we want such as AI as we enter the “age of electricity” as the International Energy Agency calls it. But the constraint is most ominous for what it will do to slow the necessary transition to clean energy, the best solution to rising temperatures.
Global average temperature last year breached 1.5C above pre-industrial levels, the first threshold identified in the 2015 Paris Agreement. Electrification is one of the most powerful ways to tackle climate change and prevent warming far past 2C, the fallback target set out by Paris. Electrical devices are more efficient than fuel-burning furnaces or combustion-powered cars, and the vast majority of new electricity generation being built around the world is carbon-free.
Electrification is also critical for economic growth. To a distressing extent, it’s not just widely discussed political issues but also hidden bottlenecks such as a scarcity of transformers that are holding back the energy transition more than a lack of money or the wait for breakthrough technologies that haven't been developed yet.
North America and Europe, where demand for electricity has remained flat or declined for the past few decades, are now starting to see an increase instead with the rapid rise of AI, combined with growing sales of electric cars, heat pumps and air conditioners. But the supply chain for grid components in those regions only exist for the sleepy business of replacing broken or aging infrastructure. Now, for the first time in a long while, these supply chains need to readjust and grid companies need to build for growth.
That creates constraints with no quick fixes. Global electricity demand is rising so fast that even in India, which has seen a 10% annual increase in electricity production this century, delivery times for transformers have doubled in the past year....
....MUCH MORE
