Europe’s looming power grid roadblock: Transformers

A shortage of transformers is putting Europe’s grid build-out at risk, stretching project lead times and adding to a price surge that will be felt on consumers’ bills, researchers and experts have warned.

The EU is in the midst of a massive build-out of its electricity grid network, estimated to cost €584 billion between now and 2030. This expansion is needed to service the millions of new electric vehicles and heat pumps and accommodate a swathe of new wind turbines and solar panels. 

But a roadblock is rearing its head. “We are facing a transformer shortage in Europe,” said Savanna Altvater, in charge of power distribution at the EU industry association Eurelectric.

While nobody knows the exact figure, the industry body estimates that within the EU and Norway, there are some 4.5 million transformers installed.

But that is because transformers, which increase and decrease voltage, are everywhere in the power grid. From offshore wind turbine to household, electricity voltage can change up to six times before we use it to do the laundry at home.

Transformers’ critical importance to power systems is being made painfully clear in Ukraine, where Russia is targeting these devices incessantly. Europe has sent 2,700 replacement transformers to Ukraine, further tightening the bloc’s shortage.

From industrials electrifying their production processes to renewable project developers, “everyone needs transformers,” said Joannes Laveyne, a research assistant at the electrical energy lab of Ghent University.

The result: Lead times that used to be 9 to 12 months, are now “at least double”, said the researcher, who has personally seen delays and price upticks in the transformers needed for his lab at Ghent University.

These delays are being felt even more acutely by industry. 

“Without booking years ahead in the production capacity of European producers, you will have no chance to get a transformer. This is a huge issue,” explained Zsuzsa Cseko, senior adviser for network issues at Eurelectric.

Delays with transformers can have knock-on effects, prompting the European Commission to look into the issue, Euractiv understands. 

The biggest potential ramification of the transformer shortage? Delayed connection of new renewables or large industrial machines to the grid, which could endanger the EU’s climate and energy independence goals. In Germany, transformer shortages may cause delays of up to two years in offshore wind development.

These delays happen because the largest transformers have bespoke designs, and though they are relatively few in number compared to smaller neighbourhood models, “they have an outsized impact on the functioning of the power grid,” said Laveyne.

But the number of manufacturers and their production capacity does not seem to increase, the researcher noted. Just three large companies dominate the market: Germany’s Siemens, US firm General Electric, and Japan’s Hitachi

In part, European companies’ reluctance to invest in new production facilities stems from a lack of certainty beyond 2030. 

While “order books are full until 2030 due to EU policies like the Green Deal, manufacturers hesitate to invest due to uncertainty about the 2040 targets and beyond,” the researcher explained.

A lack of skilled workers adds to their challenges. 

Transformers are “a very difficult product” requiring “a lot of technical manpower to build”. Little of the process is automated, and large bespoke transformers are produced via “manual labour,” said Laveyne. 

Those skilled workers, combining electrical with technical expertise, are in “short supply,” he added. Similarly, US-based producer ERMCO cited a “very tough labor market” in a chat with the podcast Catalyst. 

Then there is also a shortage of key components. 

The ”iron core of the transformers are produced by only a handful of companies worldwide, so with their output limited, it has become another bottleneck,” said Cseko.

Price surge

Delays are only half the problem – high prices are another. Transformers use a lot of high-quality steel and cooper, for which prices have more than doubled in the past five years.

ERMCO’s Tim Mills said the cost of raw materials has caused a 75 to 100% increase in price”, adding that through utilities, these additional costs are ultimately passed on to consumers. 

“We can still get them at a higher price,” explained Eurelectric’s Cseko.

The solution, according to the industry expert, would be for European industry to be “woken up” through “partnerships with governments or other incentives” that would pay off by keeping production in Europe and adding to security of supply.

Alternatively, grid operators, who have no choice but to install transformers, could turn to other global manufacturing hubs, such as Egypt or China.

[Edited by Donagh Cagney/Zoran Radosavljevic]

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