The U.S. Department of Energy (DOE) recently finalized Congressionally-mandated energy efficiency standards for distribution transformers to increase the resiliency and efficiency of America’s power grid, support good-paying, high-quality manufacturing jobs, and accelerate the deployment of affordable, reliable, and clean electricity around the nation. These updated standards—which includes a longer compliance timeline of five years—will save American utilities and commercial and industrial entities $824 million per year in electricity costs, and result in more demand for core materials like grain-oriented electrical steel (GOES). 

Following a proposed rule issued last year, DOE adjusted these final standards based on extensive stakeholder engagement to ensure continued growth opportunities for domestic steel production and provide a longer compliance timeframe of five years.  

House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA) issued the following statement regarding the Department of Energy’s final rule to regulate distribution transformers:

“While I am still reviewing the finalized rule, it is encouraging to see that the Department, in response to pressure from Energy and Commerce Republicans, has scaled back their initial proposal to make it more practical. The changes included—like extending the compliance timeline and moderating some of the manufacturing requirements—are a step in the right direction, but more still needs to be done to address ongoing transformer supply chain issues and to ensure this new rule does not further increase costs for Americans. Our electric grid is crucial to keeping the lights on, heating our homes, and powering our hospitals and businesses, and House Republicans will continue our work to ensure that it is reliable, affordable, and secure.”

“Today’s actions reflect DOE’s deep commitment to developing forward-looking solutions that align with President Biden’s industrial policy goals, including creating good-paying jobs, strengthening domestic manufacturing, and helping American workers capture the economic benefits of our clean energy economy," added U.S. Secretary of Energy Jennifer M. Granholm. “The regulatory process can work, and this final rule shows just that by reflecting feedback from a broad spectrum of stakeholders. Ultimately, it will be a piece of the solution, rather than a barrier, to help resolve the ongoing distribution transformer shortage and keep America’s businesses and workers competitive." 

“Pennsylvania is a national energy leader, and the skilled workers at Cleveland Cliffs in Butler County know how to build the transformers that power our nation’s critical infrastructure,” said Pennsylvania Governor Josh Shapiro. “I engaged directly with Secretary Granholm and the Biden Administration to ensure Pennsylvanians’ concerns about the proposed rules were heard, and I want to thank them for making sure the final rule will allow for Butler Works to continue its existing line of steel production in Western Pennsylvania, while supporting upgrades that will help spur innovation, protect jobs, and reduce carbon emissions from the plant. As a result, we have saved thousands of union jobs at the Cleveland-Cliffs Butler Works facility, meaning those workers are going to continue to be able to put food on the table and to prosper here in Pennsylvania. Here in the Commonwealth, we know the hardworking Pennsylvanians in the energy sector are critical pieces of our economy—and we’re grateful to the Biden Administration for this commitment to protecting and creating energy jobs, while creating a more efficient, cost effective, and reliable grid in the long term.”

“The Butler Works facility is the bedrock of the community, employing over 1,200 workers with good-paying jobs to support their families,” said U.S. Senator Bob Casey (PA). “With this final rule, the Department of Energy listened to the concerns of Pennsylvania workers and made adjustments so Butler Workers can continue to produce Pennsylvania-made steel for electricity transformers. I’ll continue to work with Cleveland-Cliffs and the United Auto Workers to ensure that Pennsylvania workers remain integral to our energy supply chain.”

“Pennsylvania’s UAW and steelworkers are the backbone of our nation’s manufacturing sector, unrivaled in producing the highest quality steel on the global stage. In collaboration with these hardworking manufacturing workers, the Department has forged a rule that safeguards jobs and fortifies our steel production industry, all while enhancing the efficiency of our electrical grid.” said U.S. Senator John Fetterman (PA). “This decision guarantees that Pennsylvania workers in Butler and beyond will continue to lead and grow production of electrical steel for years to come. I am grateful to Secretary Granholm for the Department's move to bolster our nation's energy future. This decision underscores an undeniable truth: American manufacturing is the cornerstone of innovation in finding affordable and reliable clean energy solutions.” 

“I appreciated Secretary Granholm speaking with me about this issue when she came before the House Appropriations Committee last month and applaud DOE for hearing the concerns I and others voiced about the proposed rule’s impact on domestic manufacturing and distribution transformer supply chains,” said U.S. Representative Marcy Kaptur (OH-09), Ranking Member of the House Appropriations Subcommittee on Energy and Water Development. “The final rule strikes the appropriate balance between lowering energy costs for consumers, protecting national security, and supporting electrical grid resiliency and reliability improvements. This decision will help protect Ohio jobs and consumers and ensure a domestic supply of transformers built in the Heartland.” 

“The final Department of Energy rule announced today will protect American-made Grain-Oriented Electrical Steel and the jobs of hardworking UAW workers in Western Pennsylvania who make it,” said U.S. Representative Chris Deluzio (PA-17). “I am proud that the Biden Administration heard my concerns and worked with our community to come to a solution that will cut millions of tons of carbon emissions, protect jobs in Western Pennsylvania, support our domestic transformer industry, and ensure the United States has the capacity it needs to meet rising demands on the energy grid. I thank my colleagues—including Senators Casey and Fetterman, Congressman Kelly, and others—for their efforts.” 

The updated final standards can primarily be met with GOES, the majority of which will be manufactured in the United States, and a small segment of the market will be met with amorphous alloy, also expected to be manufactured in the United States. Distribution transformers convert high-voltage electricity from power generation sources to levels safe enough to be utilized by homes and businesses. Over 60 million distribution transformers are mounted on utility poles and pads across the nation—operating 24 hours a day, 365 days a year, and remaining in use for many decades. Improvements to their efficiency will reduce wasted energy on the power grid and provide significant energy savings to the nation. Over 30 years, the new standards are expected to save Americans over $14 billion in energy costs, while also reducing nearly 85 million metric tons of dangerous carbon dioxide emissions—equivalent to the combined annual emissions of nearly 11 million homes. The energy savings over 30 years of shipments is 4.6 quadrillion British thermal units, which represents a savings of 10% relative to the energy use of products currently on the market. 

These standards are expected to protect existing domestic supply of core materials used in distribution transformers, increasing resiliency in the distribution transformer supply chain, while preserving steel union manufacturing jobs in Pennsylvania and Ohio. The GOES production at these same locations will also benefit from DOE’s recent $75 million grant, as part of President Biden’s Investing in America agenda, for furnace upgrades to slash carbon emissions, which are expected to make U.S. domestic GOES amongst the lowest emission GOES in the world. 

While the initial proposal would likely have represented about a 95% market shift to amorphous alloy, under today’s final rule about 75% of the market will be able to achieve the standards with GOES. The final rule also extends the compliance timeline from three years to five years. These changes are responsive to stakeholder concerns about the feasibility challenges presented by the proposed efficiency levels, including the magnitude of anticipated workforce reskilling. Today’s final rule gives manufacturers more flexibility to meet modest efficiency increases as distribution manufacturers prepare existing and develop new manufacturing lines to increase the nation’s total distribution transformer manufacturing capacity.  

Transformers are crucial components in grid modernization and are increasingly needed for stepping down power for electric vehicle chargers. A recent study by the National Renewable Energy Laboratory (NREL) projects a tripling of distribution transformer installations by 2050.  These adopted standards balance the supply chain concerns of installation increases, while making significant strides in efficiency gains of these units. The efficiency standards being adopted today for distribution transformers—which include liquid-immersed, low-voltage dry-type, and medium-voltage dry-type equipment—consider feedback from a diverse set of stakeholders, including manufacturers, the manufacturing trade association, union workers, energy and environmental advocacy groups, state officials, and utility organizations and companies.  

In addition to updating these energy efficiency standards as directed by Congress, DOE is also leading government and private sector convenings to address near-term supply chain challenges for distribution transformers and other key components in the electric grid. This has included elevating potential programmatic and resources across government, including not only existing R&D programs, but programs within the historic Bipartisan Infrastructure Law that can improve supply chain and enhance grid resilience.