Posted originally on the conservative tree house on November 24, 2022 | sundance
We have been closely monitoring the signs of a global cleaving around the energy sector taking place. Essentially, western governments’ following the “Build Back Better” climate change agenda which stops using coal, oil and gas to power their economic engine, while the rest of the growing economic world continues using the more efficient and traditional forms of energy to power their economies.
Within the BBB western group (identified on map in yellow), the logical consequences are increased living costs for those who live in the BBB zone, and increased prices for goods manufactured in the BBB zone. In the zone where traditional low-cost energy resources continue to be developed (grey on map), we would expect to see a lower cost of living and lower costs to create goods. Two divergent economic zones based on two different energy systems.
This potential outcome just seemed to track with the logical conclusion. The yellow zone also represented by the World Economic Forum, and the gray zone also represented by an expanding BRICS alliance. Against this predictable backdrop we have been watching various events unfold, some obvious and some less so.
Today, we get an obvious example:
NEW DELHI, Nov 24 (Reuters) – Fiat parent Stellantis (STLA.MI) has concluded it can’t currently make affordable electric vehicles (EVs) in Europe and is looking at lower-cost manufacturing in markets such as India, its chief executive told reporters.
If India, with its low-cost supplier base, is able to meet the company’s quality and cost targets by the end of 2023, it could open the door to exporting EVs to other markets, said Carlos Tavares, CEO of the group whose brands also include Peugeot and Chrysler.
“So far, Europe is unable to make affordable EVs. So the big opportunity for India would be to be able to sell EV compact cars at an affordable price, protecting profitability,” Tavares told reporters at a media roundtable in India late on Wednesday.
Stellantis is investing heavily in EVs and plans to produce dozens in the coming decade, but Tavares warned last month that affordable battery EVs were between five and six years away.
On his first visit to India since taking over as Stellantis CEO, he said the company was still working out a plan regarding EV exports from the country and had not yet taken any decisions. (read more)
Normally we would expect to see market forces determining the ultimate economic outcome. Historically, we would not expect government policy that puts their nation at an economic disadvantage. However, in this WEF controlled new western economic normal we see multinational corporations’ making decisions and government leaders creating policy to support the corporations.
There is money to be made by corporations within the climate change agenda, and there is money to be made by producing goods with low-cost wages and cheap materials. Eventually, if you keep following this to its natural conclusion, the entire yellow zone becomes a service driven economy.
Multinational corporations in control of government are what the BRICS assembly foresaw when they first assembled during the Obama administration. When multinational corporations run the policy of western government, there is going to be a problem. Brazil, Russia, India, China and South Africa (BRICS) saw President Obama sub-contracting, actually giving away, U.S. trade policy.
In the bigger picture, the BRICS assembly are essentially leaders who do not want corporations and multinational banks running their government. BRICS leaders want their government running their government; and yes, that means whatever form of government that exists in their nation, even if it is communist.
BRICS leaders are aligned as anti-corporatist. That doesn’t necessarily make those government leaders better stewards, it simply means they want to make the decisions, and they do not want corporations to become more powerful than they are. As a result, if you really boil it down to the common denominator, what you find is the BRICS group are the opposing element to the World Economic Forum assembly.
The BRICS team intend to create an alternative option for all the other nations. An alternative to the current western trade and financial platforms operated on the use of the dollar as a currency. Perhaps many nations will use both financial mechanisms depending on their need.
The objective of the BRICS group is simply to present an alternative trade mechanism that permits them to conduct business regardless of the opinion of the multinational corporations in the ‘western alliance.’
Again, if you follow the Build Back Better agenda to its natural conclusion, the entire yellow zone becomes a service driven economy.
Posted originally on the conservative tree house on November 24, 2022 | sundance
There is a significant lag in all data within the housing market. That said, the third quarter (July, Aug, Sept) data reflects a significant drop in institutional investment within the housing market.
If you look closely at the timing (keep in mind the data reporting lag) what you will notice is that financial institutions began a big surge in purchasing hard assets, specifically real estate, as soon as Joe Biden took office (Jan ’21), and the economic policy became evident. Intangible financial instruments became an immediate risk as the professional financial control groups recognized energy policy would drive inflation (supply side) and devalued money would fuel it (demand side).
As an offset to predictable inflationary policy (the insiders’ game), institutional money (Blackrock, Vanguard etc) was moved into hard assets with tangible value. This shift in asset allocation, institutional sales, helped fuel a false surge in home prices and their valuations. CTH was writing about this in 2021, and sounding alarms as it took place. 25% of all real estate purchases were being made by institutional investors.
The dynamic was predictable. The Biden administration economic policy, energy policy and monetary policy, was going to cause massive inflation. CTH was shouting about it in early 2021 and warning everyone to prepare for waves of price increases that would naturally surface first on high-turn consumable goods, and then embed into longer-term durable goods.
Despite claims to the contrary, this 2021 inflationary explosion had nothing to do with the pandemic or supply chain shortages. It is entirely self-created by western governmental policy; the collective ‘Build Back Better’ agenda. You can see now from the background moves within the financial sectors, they too knew the reality and their money shifts reflected that despite their ‘transitory’ pretending they were mitigating their own exposure.
We the People were yet again going to be victims of specifically intended monetary, regulatory, energy and economic policy.
The investment class rulers of the WEF assembly shifted assets to avoid the pain that we would feel. We “would own nothing and be happy,” and their shifts would position them to own everything and be in control.
Overall govt spending and regulatory controls drove inflation for these past two years. The ‘demand side’ was blamed, despite the lack of demand. I will be proven right when history is concluded with this. Interest rates were raised by central banks in an effort to support the policies that are driving ‘supply side’ inflation, not demand side.
Energy policy was/is crushing the consumer by driving up the cost of all goods and services. To support the overall goal of changing global energy resource and development (a false and controlled global operation), central banks raised interest rates. Various western economies, including our own, have been pushed deeper into a state of contraction by central banks crushing consumer demand, and eliminating investment via increased borrowing costs.
In short, the goal was/is to lower energy consumption by shrinking the economic activity. This, according to the BBB plan, was needed at the same time as energy development was reduced. These economic outcomes are not organic, they are all being controlled by collective western government agreement.
Within this control dynamic, there was always going to be a point where the reaction of the people to their economic reality means the financial control elements need to shift direction. They will always maximize profit and minimized risk, while knowing what the larger objective remains.
Just like every other durable good, housing demand contracts as prices and costs become unaffordable. The loss of equity within your home is damaging to your own value or ability to borrow against it. From the perspective of an institutional asset, that same equity drop is an investment loss. Thus, just as a consumer would exit the housing market, so too will institutional investment groups now control the slow dumping of the asset to remove the equity they pumped into it.
Much of the investment housing will be retained as rental housing, with the monthly rents being part of the returns on the investments. However, as this dynamic unfolds further purchases of houses stop, because the asset overall is declining in value.
(Via Wall Street Journal) – Investor buying of homes tumbled 30% in the third quarter, a sign that the rise in borrowing rates and high home prices that pushed traditional buyers to the sidelines are causing these firms to pull back, too.
Companies bought around 66,000 homes in the 40 markets tracked by real-estate brokerage Redfin during the third quarter, compared with 94,000 homes during the same quarter a year ago. The percentage decline in investor purchases was the largest in a quarter since the subprime crisis, save for the second quarter of 2020 when the pandemic shut down most home buying.
The investor pullback represents a turnaround from months ago when their purchases were still rising fast. These firms bought homes in record numbers last year and earlier this year, helping to supercharge the housing market.
Now, investors are reducing their buying activity in line with the decline in overall home sales, which have slumped with mortgage rates rising fast. (more)
At a macro level, if you bought a home in the last 18 months, or refinanced your home to pull out equity, you still have significant downside exposure. Home prices will continue dropping until they plateau on the downside at the price that existed in roughly June of 2021.
The drop in value is directly related to the regional purchases by the institutions. In areas where higher percentages of overall home sales were made by institutional investors, the subsequent drop in value will be larger (see chart above). In areas where actual people purchased homes to live in, the drop in value will be less significant.
I keep getting this buying question, so with the above in mind I will answer it in the most brutally honest way I can present…..
At a macro level, if you are going to purchase a home on this downslope, look at the historic valuation of that property (or a comparable property) in/around approximately the spring of 2021. Start there, and put your offer in that vicinity, then hold firm without any emotional attachment to it. Do not purchase another groups loss.
Posted from the conservative tree house on November 24, 2022 | sundance
As I have said: “the primary contest in 2024 is going to be epic, because this time the MAGA scruffnecks will, for the first time in years, clearly see who the enemy within the Republican ranks really are. This makes them so much easier to defeat, and also explains why the corporate and billionaire professional managers within the Club are desperate to keep stuff hidden.”
The recent statements against MAGA by former House Speaker Paul Ryan and former Attorney General Bill Barr, are examples of this increased sunlight. Do not be discouraged by their attacks, we need this clarity. Each moment the corrupt step forward, is a moment to smile.
[Via Dutchman] – I see all SORTS of encouraging news, and Sundance declaring “The Big Ugly” outright WAR between Mainstreet vs Wallstreet is on, is the best news, EVAH. I have been spoiling for this fight, for YEARS.
The Wall Street group are like stealth bombers; their strength is in their stealth; take that AWAY, and they are just another airplane, as vulnerable to AA fire as any other. Actually, MORE vulnerable, because they are designed and pilots are trained with the assumption of having stealth, and so they are terrible at evasive maneuvers.
EVERY battle in which MAGA forces RINO to expose themselves and their true nature, is a victory for US, even if we take casualties.
So, J6 a victory for US, as RINOS said, “let em rot in jail!”
2022 midterms, a victory for us as McCarthy were exposed, donating to MAGA opponents.
Cheer up, we WILL take more casualties, but poor mitch is BUCK NAKED, as are the rest of the effete elites.
The United Nations proposed a new method to funnel money out of developed nations during the COP27 meeting – climate reparations. The United Nations is still negotiating who will pay what, but rest assured, the US will likely pay the most. President Biden fully supports the idea in addition to the $1 billion he was granted last year to fight third-world climate change. China is considered a developing nation, according to the UN, and will not contribute to the global fund despite being the largest polluter in the world.
The ”loss and damage fund,” as it is known, would take money from rich nations in an attempt to change the weather and prevent natural disasters that would take place even if humans did not inhabit Earth. The funds would primarily be sent to countries in Latin America, Africa, and Asia. Fears are sparking that this would act as a confession, and developing nations could sue developed nations and/or businesses for additional compensation.
Trump attempted to get America out of the Paris Accord. The GOP-majority House will likely not vote in favor of this measure. Our best bet is to hope they kick the can down the road until Biden’s term has ended.
Posted originally on the conservative tree house on November 21, 2022 | Sundance
The American Farm Bureau price estimation for the Thanksgiving Day basic foodstuffs seems underestimated every year. However, this year with grocery store prices jumping dramatically the basic Thanksgiving Dinner as calculated is up 20% [Data Here]
(AFB) – Spending time with family and friends at Thanksgiving remains important for many Americans and this year the cost of the meal is also top of mind. Farm Bureau’s 37th annual survey provides a snapshot of the average cost of this year’s classic Thanksgiving feast for 10, which is $64.05 or less than $6.50 per person. This is a $10.74 or 20% increase from last year’s average of $53.31.
The centerpiece on most Thanksgiving tables – the turkey – costs more than last year, at $28.96 for a 16-pound bird. That’s $1.81 per pound, up 21% from last year, due to several factors beyond general inflation. (read more)
On the positive side of things, we note two points: #1) the third wave of food inflation should crest the beginning of December; and #2) a lot of readers here were proactive and purchased holiday ingredients long before the massive price increases showed up. Great job.
Although, as WeeWeed has noticed, this year is making everyone a little spicy…
Posted originally on the conservative tree house on November 17, 2022 | Sundance
In a 52-paragraph mutually agreed declaration following the G20 Summit in Bali, Indonesia, the leaders at the 20-nation summit have agreed to a process for digital vaccine IDs to facilitate international travel. The alarming aspect is found on paragraph 23 of the Declaration.
[Paragraph 23] – We support continued international dialogue and collaboration on the establishment of trusted global digital health networks as part of the efforts to strengthen prevention and response to future pandemics, that should capitalize and build on the success of the existing standards and digital COVID-19 certificates.
“We acknowledge the importance of shared technical standards and verification methods, under the framework of the IHR (2005), to facilitate seamless international travel, interoperability, and recognizing digital solutions and non-digital solutions, including proof of vaccinations.” (link)
The members of the G20 are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.
Retail relies on the holiday season for the bulk of its revenue. In fact, a quarter of all retail spending in the US occurs in the last two months of the year. Numerous retailers have already downgraded their forecasts for the holiday season, and therefore, overall revenue estimates will go down. I reported that early indications of Halloween spending amid inflation were cause for concern. People were still willing to spend on the holiday, but everything cost significantly more, and availability was limited.
Two weeks ago, reports were coming in of hiring halts, but now mass layoffs are suddenly appearing in the news. Amazon plans to fire 10,000 employees this week alone. This is a steep mass layoff that represents 3% of corporate employees and 1% of the entire workforce. This is the largest layoff in the company’s history.
Other retailers have announced layoffs as well, and this is not limited to the US. E-commerce giant Alibaba also laid off nearly 10,000 workers this past August due to poor numbers. AliExpress eliminated 40% of its entire workforce and cited supply chain disruptions as the main culprit, as it was one of the most popular shopping apps in Russia.
Gap Inc. will eliminate 500 corporate roles in the US and Asia. Peloton parted ways with 500 people in October in its most recent round of layoffs. Shopify eliminated 10% of its staff in July and plans to make additional cuts. Nordstrom fired 200 employees from a warehouse distribution center. Wayfair eliminated 900 positions after a hiring freeze in May. Mass layoffs are becoming a common occurrence during a time when retailers usually hire additional staff.
The supply chain crisis is to blame. FedEx plans to furlough employees right before the busy Christmas season. Their revenue was up 21% last quarter, but shipments fell 5% in the same time period. Overall inflation and wage losses are a positive sign for the Fed but a complete disaster to individuals and their families. Expect sales as retailers attempt to eliminate outdated inventory to make room for delayed shipments.
The Republican has won the House. It took more than a week for the Associated Press to determine the GOP had won the 218 seats necessary to control the chamber. Never in my entire life have I ever witnessed an election take this long to find out who won. This is all the paper absentee ballots where my own staff could right a national voting program in less than one month and you do not need the paper nonsense. Dead people will not be able to vote and there will be no harvesting of ballots.
While the press wants to portray this as an underwhelming performance for the Republicans when they should have won hands-down considering the national decline in confidence in Biden that normally would have worked to their advantage, the corruption in the election process has been itself unprecedented.
Our computer was correct – there would be no red wave. The report ($14.95) provided our Timing Arrays forecasting politics out for 12 years. The Republicans would take the House but not the Senate for this would be an extremely tight election due to the corruption. The whole point of the press calling for a red tidal wave was to make sure Republicans felt their vote was not needed so why bother? That was a strategy to keep that up in the press. I saw the same tactic was used to get Jimmie Carter elected. I remember that well for even I concluded it was so overwhelming I did not vote – they didn’t need me. Then you woke up with a surprise nobody expected.
This will now contribute to 2023 where we see rising civil unrest and the Republicans will bring impeachment proceedings against Biden and dive into the Hunter Laptop like never before. The Democrats are about to find out what goes around – comes around. All civility in politics has been tossed out the window.
This is the decline and fall of America. The country is now so divided, there is simply no possible way to ever bring it back to the middle. The Democrats still hate Trump and will push to discredit all Republicans using Trump. The hateful way politics has emerged ensures there is absolutely NOBODY on a white horse who will save the day. It will be soon to just turn out the lights.
Posted originally on the conservative tree house on November 16, 2022 | Sundance
The Democrat left-wing policy platform includes unlimited abortion, denunciation of the traditional family, declarations that excessive populations create climate crisis and other less obvious points of advocacy that eliminate domestic population growth. However, in order for left-wing politicians to continue advancing ridiculous ideological policy, they must pretend not to know things…. Here comes Senator Chuck Schumer.
During a pantomime script to advance the goal of amnesty for illegal aliens, Chuck Schumer pretends not to know his party agenda is to reduce the American workforce. Now Senator Schumer claims the absence of a growing population is the reason why amnesty for illegal aliens must be accomplished. WATCH (20 seconds):
The leftist arguments are so weak and built upon tenuous foundations of lies, they literally collapse when challenged or confronted. This is why Democrats never want to debate their positions. All of their policies are built upon hypocrisy, fraud and illogically false constructs. Leftism demands the suspension of logic.
We have been hearing a lot of talk about nuclear war as if it were nothing. One aspect that has been missing is what happens to us when our electric grid is turned into dust. I want to talk about just one aspect – transformers. Whether at the power plant, or at the receiving end, large power transformers are essential. We are talking about 100MVA and larger. These things take several years to build, assuming the material supply chains and production facilities are intact and functional. If not, all time frames are significantly extended. Further, our existing power transformers are nearing end of life. Imagine what would happen if a significant amount of electrical infrastructure was damaged. Here is an article to help understand.
Large electric transformers are inconvenient machines. They are large and heavy, which means they usually need to be delivered by sea freight, not air freight, which would be faster. They must be designed by specially trained engineers and assembled by experienced technicians. They require expensive and often rare materials, like copper, specifically milled steel, high-cellulose paper and other hard to come by components. They have extremely exacting technical specifications, which limits production and keeps new producers out of the market. They must be built to exacting standards for safety and reliability, which requires extensive testing and often customized manufacture.
As inconvenient as large transformers are, the power grid as we know it could not function without them, or even without enough of them. According to the Energy Department’s Office of Electricity, over 90 percent of the electricity consumed in the U.S. passes through a large power transformer.
Before a pandemic sent shudders through global supply chains, the U.S. was 82% reliant upon imports to meet its need for large transformers, according to a 2020 study by the Commerce Department. The U.S. power grid’s increasingly talked-about issue with aging equipment also extends to transformers. The average age of installed large transformers in the U.S. is about 40 years, which is at the end of their expected operational life. Older transformers are more likely to fail and need replacement, but a look at these statistics is enough to show that the U.S. was already sitting in a risky spot before supply chains became a common topic in the mainstream.
Today, people in the industry are reporting longer lead times to get needed equipment, including transformers. Jim Templeton, a third-party consultant to POWER Engineers with 40-plus years in the industry and his own consulting firm, JB Templeton Consulting LLC, said an aging power grid and ongoing supply chain issues are mixing in disruptive ways.
“I deal with a number of different clients on the utility side and about a year ago we started to see lead times from transformer manufacturers creep up. Before the pandemic, you could get a large transformer ordered in less than a year. Today that is rare. A relatively large manufacturer in the US was at about 38 months. That used to be 38 weeks if you were to compare,” Templeton said.
The dramatically lengthening lead times for needed parts is throwing utilities’ emergency contingency plans into confusion.
“The danger I see in this is you don’t know in that 38-month period will you lose another transformer and what will you then need to repair that spot on the grid? Our grid is, I think, fairly old. There’s a lot of aging transformers on the grid. Dealing with my clients, they are trying to come up with how do I respond to an emergency situation,” Templeton said.
Scott Marshall. principal engineer with POWER Engineers, said equipment distributors used to have reservation slots for emergency situations, but now are not able to find used transformers.
“When I was with a utility, we could go to a transformer supplier in an emergency and get what we needed in about six months. That quick replacement we used to be able to get, you might be waiting a year or more. They can’t find those slots for you,” Marshall said. “They may put in a dicey unit just to get the power flowing, knowing that they may have to replace it in one or two years.”
In a video interview with T&D World, Templeton said many utilities get their equipment, including transformers, from an approved supplier list. The tightening of certain supplies led to utilities going off their usual lists and make compromises just to get needed gear.
“[Utilities having trouble finding equipment] now have to open up the doors to a much larger set of potential suppliers, ones they’ve never had a relationship with before just to get what they need. That might not sound horrible, but these relationships have a positive effect on the procurement slide,” Templeton said. “Now people are having to purchase from companies and countries that they never worked with before.”
It is still relatively easy to get a 10 MVA transformer from a supplier utilities know and are used to dealing with, but a 1000 MVA transformer might not be available from a reliable source, Templeton said.
The Energy Department is looking into the drivers of these shortages, and they are complicated and global. According to a “deep dive” supply chain assessment released by the DOE in February 2022, produced as part of an executive order to investigate supply chain disruptions, raw material shortages are to blame for the manufacturing shortfalls of critical power grid equipment like transformers. The report focuses on raw material supplies, such as rare earth metals for energy storage batteries. However, just as much time is spent on grain-oriented electrical steel (GOES), which is a critical component in transformer cores and laminations.
The GOES it takes to build a transformer can make up a quarter of the finished good’s production cost. In a large transformer weighing some 400 tons, GOES is a large part of that weight.
According to a Commerce Department report from October 15, 2020, the U.S. manufacturing bas for GOES is on life support, with only one company, AK Steel, Inc., a unit of Cleveland Cliffs Inc., milling GOES at two factories in Ohio and Pennsylvania. These factories are not profitable, and the CEO has said the company may close the last GOES plants in the U.S., leaving the country entirely dependent on imports, according to the Commerce Department. Most of the GOES in the world comes from China (including Hong Kong), Japan, France, German, India, Poland, the Czech Republic, Russia, Brazil and South Korea.
Also, much of this supply is used internally and not exported, the Commerce Department notes. This is because countries like China and India are in the process of large power grid buildouts.
“In contrast, the U.S. market is mature, and demand for transformers is largely based on upgrades and replacements of aging infrastructure, including efforts to install smart grids to increase energy efficiency. The average transformer in the United States is 38 years old, with 70 percent of U.S. transformers older than 25 years,” according to the Commerce Department report, “The Effects and Imports of Transformer Components on the National Security.”
The Commerce Department said this situation is a threat to both the bulk power grid and national security. Perhaps underscoring the seriousness of the situation, many portions of the report are redacted. The report goes on to identify 16 critical sectors of the economy that could not operate without large transformers, including power plants, hospitals, waste systems, critical manufacturing, transportation systems, large commercial facilities and government facilities including military bases.
Impact on Utilities
Michael Ho, Director of Support Services at Hawaiian Electric, said his utility has seen lead times jump from 16 weeks to 142 weeks for single-phase pad-mounted transformers. Just within the past few months, lead times have more than doubled.
“We have been able to rely upon our current inventory levels to cover short-term demand thus far, and have not had any significant impacts or delays to projects as of yet.
However, while we have a steady stream of orders in place with transformer manufacturers to replenish our inventory, there is a growing concern that we could deplete our stock if demand is higher than forecasted or if the lead times continue to increase,” Ho said. “Without enough transformers in inventory, we will not be able to cover all of the transformers that are needed for projects such as new customer installations, upgrades, maintenance and emergency replacements.”
Ho said Hawaiian Electric and other utilities are urging developers and contractors to plan carefully to minimize impact on end users, communicating their plans and equipment needs to utilities as far ahead as possible to allow for longer order times.
“Projects that require non-standard transformers that aren’t frequently used have a higher potential risk since limited inventory is kept on hand for these types of transformers and there will be a significant delay in ordering and receiving new transformers,” Ho said.
Prices, along with lead times, are ballooning as well as the materials and freight costs are increasing.
“We’ve also had to dedicate much more time and cost to managing the situation, including added communication and planning. There’s also the potential of delayed revenue from new services should customer projects get delayed,” Ho said. “we’re working more closely and having more frequent meetings with our distributors to get up-to-date information on the production and delivery of our orders. We’ve also had to reach out to additional manufacturers and distributors as we seek out additional sources of supply for our materials.”
Ho said his utility is looking into repairing or refurbishing used transformers as a way to boost inventory levels and sidestep long lead times.
“We will also need to look at all alternatives for utilizing other substitute (e.g. higher kva) transformers that may be available or redesigning the system on a temporary or permanent basis,” Ho said.
Rebuilding Back Better
Scott Marshall said this might not be a desirable option for many utilities as repairing and refurbishing can be expensive.
“I haven’t had one refurbished for a while and I’m always reluctant to do it,” Marshall said. “If it’s an older unit, say 30 years old, to really refurb it, you spend a lot of money on it. Sometimes as much as 80% as new.”
Transformer components like gauges, bushings and low-tap changers have to be replaced when a unit gets too old. Besides this, many refurbishment facilities may not have the robust testing capabilities they once did, which can lead to more core losses and less efficiency.
Jim Templeton said in his time managing a large transformer manufacturing facility in the U.S., the refurbishment industry was more developed than it is today.
“Scott said it cost 80% of new to send a unit to a place like that, and we averaged about 75% of the new price. But our advantage was lead time. We could turn it around quicker than the OEM guys could turn it out,” Templeton said.
2022 would be an ideal market for a refurbisher. However, in the 2000s, it became cheaper to buy new large transformers and many remanufacturers went out of business as transformers became “throw-away items,” Templeton said.
This touches upon another driver of transformer scarcity in North America. Besides a lack of materials, there is a lack of manufacturing capacity and the skilled engineering workforce to bring production up to where it needs to be.
“I am often asked where I can go to get an engineer,” Templeton said. “My answer usually was Ukraine, which is not easy to get into now. India also has universities with those programs because they have transformer industries and wanted to have workers to go into those factories. The reason why U.S. schools are not teaching these programs is because the manufacturing jobs left.”
Marshall said manufacturers reported to him a scarcity of skilled labor.
“They are having a lot of trouble finding technicians. When Covid hit, the factory environment became more dangerous, so they had people leave who didn’t want to work in that risky environment. As they tried to bring people back on, it can take at least a year to train people,” Marshall said.
Companies often run lot of training programs, but sometimes cannot recoup their investment when people will move companies after getting their training, Marshall said. It is also challenging to get younger workers to relocate to where they are needed to do the job.
“The younger work force, they say, may not want to pay their dues,” Marshall said. “In some places, the cost of living is so high, which also makes finding skilled labor hard.”
The protracted pandemic, supply chain and logistical concerns interrupted transformer manufacturing in 2020 and 2021, said Bill Miller, Senior Vice President, Marketing and Sales for Hitachi Energy’s North American Transformer Business.
“This situation has not improved in 2022 – lead-times continue to be long, and customers continue to place advanced orders to respond to these longer lead times. The situation has actually worsened since the start of the year,” Miller said.
Miller said a confluence of issues are to blame, including regional constraints on core steel and conductor materials; growing transportation expenses as well as delays at ports and railways; and the additional tariff costs that apply to goods imported from foreign countries.
“Labor shortages and global trade difficulties do play a big role. The primary shortfall is simply lack of overall investment in the U.S. (by the industry, broadly) to expand manufacturing capabilities for core materials (steel) needed to produce transformers,” Miller said in an email to T&D World.
About 75% of the cost to make a transformer is tied directly to a commodity whose price is subject to constraints and wild swings in cost: specialized steel, copper and oil. All of these have been climbing in price.
Miller said large players in the transformer sector, like Hitachi, will be able to mitigate some of the effects via economies of scale and by drawing upon the capacity of facilities from other parts of the world.
“On the distribution transformer side, utility companies should collaborate to standardize their requirements and reduce variation in designs. More consistent designs would enable simplified and more efficient supply chains,” Miller said, suggesting a possible solution.
In April 2022, the Biden administration introduced programs as part of the $1.2 trillion Infrastructure Investment and Jobs Act to provide $20 million in rebates to replace old distribution transformers and upgrade electric motors. The transformer program is open to utilities and includes $10 million that will be available until it is spent. The DOE estimates applications will open in the third quarter of 2022.
Miller said transformer remanufacturers are under the same constraints OEMs are, however.
“Given the current market conditions, refurbishment doesn’t save a great deal in terms of either time or money and doesn’t do anything to relieve the overall supply chain constraints we are currently seeing,” Miller said.
Even so, transformer service providers are working in unfamiliar new ways to help address the shortage.
“Recondition manufacturers are working together to help each other with supply gaps. Within the industry, competitors are buying/selling transformers from each other to support the customer base,” said Barbara Beaubien, Vice President of Sales and Marketing at Emerald Transformer, which provides a range of transformer services, including remanufacturing.
Emerald Transformer is building a new plant in Waco, Texas to better support its customer base and the state of Texas. Growth in residential construction, in addition to the aging U.S. grid, are powerful drivers affecting the transformer industry, Beaubien said.
“Many more utilities are refurbishing transformers now that hadn’t considered it before they faced the transformer supply shortage with OEMs,” Beaubien said.
After initial tests, transformers are equipped with new gaskets, components and oil with additional testing throughout the rebuild before sanding, priming and painting and a final testing, Beaubien said. New transformers can take as long as two years to be delivered, and most OEMs are quoting 52 weeks plus for padmount transformers. Refurbished transformers can be available in a couple of months in most cases, Beaubien said.
In the Meantime
Templeton said this is a long-term problem with no easy answers, and said utilities need to act accordingly.
“If I was a utility in this position, I’d do everything possible to protect the transformers I have,” Templeton said.
This could include deploying protective relaying, audits of insulation coordination and making sure units are protected from incoming transients and other potential sources of physical damage.
“It appears to me that over the years, the utilities have had more internal pressures brought on them to reduce maintenance costs. PUCs are trying to keep down electric costs, and what I see is utilities are not necessarily given a full complement of dollars to do maintenance,” Templeton said.
This leads to utilities performing condition-based maintenance rather than full maintenance. So a utility may put off vegetation management, then trees fall on lines and transformers explode, thus contributing to a problem affecting the entire industry.
The U.S. power grid, Templeton said, was built differently from the start, using a different engineering philosophy.
“In Europe, they might have two equally sized units sharing the load. So, they split the load in two by running them parallel,” Templeton said. “Our philosophy was we use the asset. It has a nameplate and we use it up to that. In other places around the world, they don’t do that. We will work the livin’ daylights out of our existing units.”