Electric utilities saw warning signs even before the pandemic
Most of us first heard about supply chain issues two years ago when the COVID-19 pandemic left us looking at empty store shelves.
Shortages also affected electric utilities. But their attention to supply chains started before the pandemic and is continuing into the future. For electric utilities, the pandemic just amped up the job of keeping the lights on in an industry already adjusting to the rapid rise in renewable energy sources and power lines battered by more severe weather.
Electric co-ops are among those taking steps to manage both immediate and long-term supply chain constraints, says Stephanie Crawford, regulatory affairs director with the National Rural Electric Cooperative Association (NRECA).
“This didn’t happen overnight,” says Crawford. “Many of these dynamics started before the pandemic.”
Creating a Supply Chain Task Force
Those dynamics include the fact that there’s only one U.S.-based manufacturer of the kind of steel used to make transformers, which are vital pieces of equipment that help regulate power levels so electricity is safe to use. That constraint, coupled with a lack of enough workforce, meant that transformer manufacturers have not been able to keep pace with a significant increase in demand coming out of the pandemic. Lead times for ordering transformers jumped from one or two months to as long as two years.
Those kinds of delays threatened to slow progress on essential work, like restoring power after a storm or connecting service for new co-op members.
And it wasn’t just transformers in short supply, says Crawford. Electric co-ops also faced delays “for meters, conductors, utility poles, bucket trucks — essentially all the things needed to keep the system running efficiently, including restoration needs and serving new load.”
To reduce those backlogs, last summer the utility industry, including electric co-ops, created a task force to work with the federal government on resolving supply chain slowdowns.
Incentives for U.S. Manufacturing
The task force recommended several actions the federal government could take to help get utilities what they need. Among its suggestions was to provide incentives to encourage domestic manufacturing of steel for transformers.
The task force also identified national trends and policies that could conflict with the utility supply chain:
- Worker shortages: The same lack of people to fill jobs in many parts of the economy, from restaurants to hospitals, also affects the making of materials needed by utilities.
- Competition for workers: Any community wants its economic development efforts to attract major new employers. But a large new business could end up attracting workers away from companies that supply essential utility equipment. The industry task force recommended that the government support incentives for utility-related work.
- Renewable Energy and Infrastructure Initiatives: Electric vehicles, solar energy and even efforts to expand broadband service can use some of the same materials needed by utilities. The task force recommended the government avoid disadvantaging utility work by favoring other projects.
All these supply chain issues are causing utilities to rethink traditional business practices, says NRECA’s Crawford. She says the logistics and procurement functions of electric utilities are getting increased attention.
“New strategies are going to be needed to meet the cooperative’s needs,” she says. “They’ve not needed to project the demand for transformers five years in the future because you could get a transformer in 60 days. Now, when it’s taking more than a year for the equipment to be available, they’re going to have to look at it through a different lens.”
Utilities have been adapting to dramatic changes, says Crawford, from weather patterns to sustainable energy. Supply chain management is one of the latest twists.
“Electric co-ops are really good at keeping the lights on,” says Crawford. “But these supply chain issues have made that job more difficult. Real investment needs to be made in domestic manufacturing and supply capabilities to make sure that all utilities can get the equipment they need. This is critical infrastructure, especially as we rely on the electric grid to power everything from transportation to working at home.”
Paul Wesslund writes on consumer and cooperative affairs for the National Rural Electric Cooperative Association, the national trade association representing more than 900 local electric cooperatives.