This article describes the shift in manufacturing of transformers in the United States and its benefits. In the wake of the September 11 attacks, the grid’s heavy reliance on imported equipment was seen as vulnerability. The RecX project focused on transportation and speedy installation of a modularized grid transformer rather than grid standardization. Home-based manufacturing of transformers can have major implications for the security and robustness of the grid. Building big transformers in the United States, closer by thousands of miles to installation sites, can simplify and speed up the development of transformers. Shorter distances can also reduce transport time. Large-scale loss of grid transformers is considered a high-impact, low-frequency event. The distant manufacturing sites and long delivery times that so worried government officials in the past have been seen in a new light. They represent an annual replacement market of several hundred massive machines, sufficient to support a major manufacturing expansion in North America.

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Arguments for Energy Independence in the United States have generally focused on sources of fuel. Before the widespread use of hydraulic fracturing, the U.S. economy relied on increasing levels of petroleum imports. That part of the country’s energy supply was subject to disruptions for reasons ranging from embargoes to foreign wars.

An industry-government partnership installed RecX, a prototype emergency transformer, at a CenterPoint Energy substation near Houston in March 2012. Image: Electric Power Research Institute

Less widely discussed was another side of the energy independence issue, involving not fuel but a critical link in the delivery of energy: Specifically the huge transformers that step up voltage for long-distance transmission, and equally large transformers that step voltage down as electricity makes its way to customers.

In the fear that gripped the country after September 11, 2001, those transformers were seen as a vulnerability. They took months to replace. They are rated to handle several hundred megavolt-amperes of electricity, and they are custom engineered and built.

There were only two factories in the United States that built them. Most of those transformers, possibly 95 percent of them, were imported. If enough of them were destroyed, it could plunge regions of the U.S. into blackouts that could last weeks or months before power could be fully restored.

One possible solution was a test program involving the Department of Homeland Security and other government agencies to design an emergency transformer that could serve as an interim replacement. A demonstration was successful and the program is ending.

Meanwhile, the number of companies building big transformers in the United States has more than doubled since that program began. Manufacturing capacity near the point of delivery is expected to reduce lead times and reduce the need to rely on imported transformers.

Plants have been opened by three of the largest overseas manufacturers of grid transformers: Mitsubishi Electric Power Products, Hyundai Heavy Industries, and EFACEC. The original two transformer plants, owned by ABB and by SPX Corp., have expanded

For years, the availability of low-priced imports had made expanding U.S. capacity a risky investment. Then in 2012 the U.S. International Trade Commission, acting on a complaint filed by ABB and others, ruled that Hyundai Heavy Industries had violated U.S. dumping laws, by selling equipment in the United States at less than fair value.

Since then, the Department of Commerce, acting on the ITC’s decision, has collected 14.95 percent countervailing duties on imported Hyundai transformers rated at 100 megavolt-amperes and higher. By this time, however, manufacturers of big transformers had already recognized that U.S. business opportunities outweighed U.S. cost disadvantages.

Manufacturers declined to discuss the dumping case’s impact on their decisions.

Mitsubishi Electric Power Products Inc. (known as “Meppi”) opened its plant in Memphis, Tenn., in April 2013. Shipments began in mid-2014. It reported an order backlog of more than 20 transformers with ratings as high as 600 megavolt-amperes.

Hyundai Heavy Industries opened its Montgomery, Ala., plant in November 2011 and said it can produce up to 200 big grid transformers per year with ratings up to 550 MVA.

EFACEC, headquartered in Portugal, opened operations in Rincon, Ga., near Savannah, in April 2010. As of mid-2014 the company reports an order backlog of about 30 transformers, adding that it has shipped nearly 120 power transformers with capacities of 30 MVA and higher. EFACEC said its maximum rating is 500 MVA.

The three companies built a combined total of more than 800,000 square feet of factory space to build big transformers. Their investments add up to more than $500 million. 1500-1800 large transformers in use 2 domestic factories (pre 9/11/2001) 90-95% of all new units were imported 400-600 units per year will need replacing$1.4 MILLION average cost per unit

Meanwhile, SPX and ABB Inc. expanded their facilities. SPX invested $70 million to bring its Transformer Solutions unit in Waukesha, Wis., to more than 400,000 square feet; the expansion opened in April 2012. ABB said it has steadily expanded its Transformer Remanufacturing and Engineering Services in St. Louis, but declined to provide numbers. Prior to these expansions, ABB and SPX together supplied perhaps 5 to 10 percent of the big transformers sold in the United States; virtually all the others were built overseas—which some saw as a worrisomely high dependence on imports for a vital sector of the U.S. infrastructure. The five U.S. plants now have the apparent capacity to meet the foreseeable demand for big grid transformers. Indeed, estimated capacity of the five plants adds up to more than a typical year’s imports. The U.S. grid may still absorb some imports, but the decline in imports has already begun. A U.S. Department of Energy report, Large Power Transformers and the U.S. Electric Grid, estimated that 496 big transformers were imported in 2013. That’s a drop of more than 20 percent from the import peak of 610 units in 2009. Updated in April 2014, the report was done by the Infrastructure Security and Energy Restoration Office of the Energy Department’s Electricity Delivery and Energy Reliability unit. ## Electric Connections The North American grid spans the U.S., Canada, and the northwest corner of Mexico—200,000 miles of power lines carrying voltages of 230 to 765 kV. The grid is owned and operated by dozens of individual utility companies. They coordinate their efforts through the North American Electric Reliability Corp. in Atlanta. Utilities use this network nonstop to buy and sell power to each other. These sales keep electricity supply and demand in balance. The big transformers are critical to this balancing act. They connect power plants to the electrical grid. They step up electric force, because high-voltage transmission minimizes losses of power in transit. Later, as electricity travels outward through local distribution systems, the long-distance grid’s high voltages must be stepped down. That process takes more big transformers. New and replacement transformers present challenges in the factories where they are made and to the utility companies that buy them. Each grid transformer is the size of a small house and weighs several hundred tons. They have almost no moving parts, require little maintenance, and typically operate for decades. ## Supply and Demand Because the grid has never been “standardized,” each big transformer has to meet the electric current and voltage characteristics where it is to be installed. Engineers also must take into account distances the power is to travel and resistance factors such as the diameter of transmission wires. This means several months of custom specification and design followed by weeks of detailed mechanical and electrical engineering. Intermountain Rigging and HeavyHaul moving a 560,000-pound power transformer in Tulsa on a 24-axle beam trailer. Image: intermountain Rigging ana HeavyHaul Moving big transformers requires barges, special railroad cars, and custom over-the-road transporters that take up two highway lanes. Experts in industry and government estimate that the U.S. portion of the North American grid has between 1,500 and 1,800 big transformers; definitions vary so the count is not certain. Officials at the Electric Power Research Institute said the organization had no solid figures. Inconsistent definitions and missing data aside, industry and government experts agree that 90 to 95 percent of the grid’s new and replacement transformers have been imported in any recent year. Government officials and many in industry saw the grid’s huge dependence on imports as an Achilles heel for the U.S. economy. Many of the experts also agreed that hundreds of big grid transformers need to be replaced. Some industry experts have calculated that as many as 400 to 600 of the grid’s aging transformers should be replaced each year for the next several years. Making one estimate was SPX Corp. in a September 2012 investor presentation, which the Department of Energy quoted in its report on power transformers. SPX estimated the grid transformer business at$1 billion a year and added that replacements should go on for several years. Meanwhile, government data valued the 469 transformers imported in 2013 at $676 million. Aside from the need to replace aging equipment, the grid is growing. It is connecting new power plants (fossil-fueled and nuclear) and new renewables (solar and wind). And it is evolving technologically to boost both resilience and reliability. ## Recovery Experiment In the wake of the September 11 attacks, the grid’s heavy reliance on imported equipment was seen as vulnerability. Three federal agencies got involved—the Department of Homeland Security, the U.S. International Trade Commission, and the Department of Commerce. In the aftermath of 9/11, Homeland Security was asked for help by the utility companies, to demonstrate how quickly even the biggest transformers could be replaced in an emergency power outage. The department’s Science and Technology unit coordinated a program that developed a backstop transformer dubbed RecX—“Rec” for “recovery” and “X” from the standard shorthand for a transformer. The RecX project focused on transportation and speedy installation of a modularized grid transformer rather than grid standardization. The Electric Power Research Institute in Palo Alto, Calif., which has been working on standardization and better transformer designs since the early 1990s, took on this work as well and subcontracted the project to ABB in St. Louis. Final assembly of a 525 MVA transformer at EFACEC’s Rincon, Ga., plant. Image: EFACEC ABB built the first RecX in St. Louis and then did final assembly, testing, delivery, and installation in just five days in March 2012. RecX was installed and is operating at a CenterPoint Energy substation near Houston, Texas. Prior to RecX, such an effort often took five months. ABB has designed an even larger version, but has not built it yet. Sarah Mahmood, who heads Homeland Security’s Science and Technology unit, said RecX was a demonstration project that has been wrapped up. For national-security reasons, some in government (and some in the transmission business) had hoped to stockpile a few RecX-type modularized transformers at key sites around the country. Some current and former federal officials are on record saying that if big transformers in just nine strategic spots were taken out of service, portions of the U.S. and Canada grid would be without electric power for weeks. Full restoration could take months, officials warned. The plan to stockpile RecX-like transformers stalled. According to Gerry Cauley, president and CEO of the North American Electric Reliability Corp.: “A limitation of the modular spares is that they would provide only temporary solutions. [They] are not designed for the decades-long lifetime of full-scale transformers.” He compared long-term reliance on modular transformers to “riding on the temporary spare tire in a vehicle.” There are, of course, backups and fallback plans. Like any industrial equipment, transformers of all sizes are inventoried and tracked in industry databases. The Edison Electric Institute has a Spare Transformer Equipment Program, or STEP, which binds utility company members to share urgently needed equipment on demand, in response to a geomagnetic storm, for example, or an act of terrorism. Other grid risks include cyber attacks on control systems, vandalism, and sabotage on physical facilities, earthquakes, tsunamis, and extreme weather. All infrastructure facilities—pipelines, canals and locks, railroads, highways, and airports—face varying degrees of similar risks. STEP includes even the largest grid transformers. Cauley noted that the North American Electric Reliability Corp. also maintains a database. “Another possibility for expanding the availability of spares,” he added, “is repurposing older transformers that are being retired and use them as spares.” Conceivably catastrophic infrastructure risks are rare and unpredictable. They are classified as high-impact low-frequency, or HILF, events. Experts disagree (sometimes sharply) on the odds of any one risk becoming an unfortunate reality, as well as on the costs and consequences. Moreover, sound planning requires that each risk be weighed and ranked against all the others. “The difficult decisions are what types of emergencies should be planned for, how many transformers are needed as spares, and what mix of customized full-scale units and modular units should serve the need,” Cauley said. “Ultimately, procuring and maintaining spare equipment requires significant capital expenditure and maintenance costs for an event that may rarely or never happen.” This is the crux of the infrastructure security debate. According to Cauley, each utility company has to decide for itself, “with consideration of rate-payer value and in consultation with local and state regulators.” Home-based manufacturing of transformers can have major implications for the security and robustness of the grid. Building big transformers in the U.S., closer by thousands of miles to in stallation sites, can simplify and speed up the development of transformers. Shorter distances can also reduce transport time. ## Hilf? it Happens Large-scale loss of grid transformers is considered a high-impact, low-frequency event, but HILFs can happen. Just after midnight on April 16, 2012, a small group of armed people attacked Pacific Gas & Electric Co.’s Metcalf substation near San José, Calif. The substation serves Silicon Valley. In 20 minutes, the attackers shot holes in the cooling oil tanks of 17 big transformers, which overheated and shut down. Power was rerouted and a blackout avoided. Investigation revealed evidence that the attack had been carefully planned and executed. Phone wires, through which the site was monitored, had been severed, for instance. The perpetrators have not yet been found. Repairing the damage took almost four weeks and cost$16 million. Had the Metcalf transformers been damaged beyond repair, replacement could have taken several months.

Oddly enough, the attack occurred about a month after the RecX transformer prototype was installed in Texas.

Today, the distant manufacturing sites and long delivery times that so worried government officials in the past have been seen in a new light. They represent an annual replacement market of several hundred massive machines, sufficient to support a major manufacturing expansion in North America, even without snipers in the dark.