If you’ve ever noticed the metal canisters attached to the tops of telephone poles, they are one type of distribution transformer. They convert high-voltage electricity from power plants to levels safe for homes and businesses. There are 60 million transformers nationwide, and it turns out the metal inside of them matters.
The core of nearly all transformers is made with what’s called grain-oriented electrical steel. Only one company in the U.S. makes it, Cleveland-Cliffs, at its plants in Butler, Pa., and Zanesville, Ohio.
A town hall meeting about the future of distribution transformers
Hundreds of workers from the United Auto Workers (UAW) union, many wearing red shirts reading “Solidarity” on the back, gathered along with their families and others from the community for a town hall meeting in Butler last Monday.
“We won’t sit back and let jobs be taken from us,” said local Congressman Mike Kelly (R-PA 16th District) at a podium in front of the standing-room-only crowd. “This is a wrongheaded decision; this rule must be pulled down,” he said.
The “rule” he was talking about was proposed by the U.S. Department of Energy in January 2023. The DOE is required to review its standards for transformers every six years. The proposal sought to switch the steel inside transformers from the kind made at Cleveland-Cliffs’ Butler Works to one that converts energy more efficiently, called amorphous steel.
Aaron Steinheiser, general manager of the Pennsylvania and Ohio plants, which employ 1,500 people, told the crowd that the proposed rule would result in a huge drop in business.
“And fundamentally it will destroy us economically, to where we cannot sustain making this product,” Steinheiser said.
After the meeting, Mike Uram and his wife expressed concerns that the Butler plant, where he’s worked for 25 years, could close.
“That mill is a generational mill. Fathers, sons, and uncles have all worked there and retired,” Uram said. “I want to see that continue for the future generations.”
Transformer supply chain issues
As the nation moves toward electrifying cars, homes and industries, there is a growing need for transformers.
One study found that the number of transformer installations will triple by 2050.
But there is already a supply shortage. According to industry experts, the wait time for new transformers is up to two years. If they need to be made with amorphous steel, which is in low supply, that could worsen the shortage.
“This is ridiculous,” said UAW Region 9 director Daniel Vicente, when asked about the DOE move toward amorphous metal, which uses materials imported from Asia.
“Why would we cede the last domestic manufacturer of electrical steel, for our critical infrastructure? Why would we give that away to the Chinese?” Vincente asked.
UAW leadership endorsed President Joe Biden’s reelection, but the membership might not agree if the administration’s policies lead to plant closures.
“In a year where you’re telling us you want us to go vote for old Joey, and you’re not doing anything to save this job?” Vicente said. “Well, don’t be shocked when you lose Pennsylvania.”
DOE’s final rule changes everything
Things shifted Thursday morning when the Department of Energy published its final rule. There were some big changes from the proposed rule.
Instead of mandating the use of the most efficient steel in nearly all transformers, Energy Secretary Jennifer Granholm said amorphous steel would only be required in 25%. Seventy-five percent would continue to be made with the type of steel already produced in Pennsylvania and Ohio.
“It’s going to strengthen energy and economic supply chain security. It’s going to protect union jobs in Butler and Zanesville and nationwide,” Granholm said at a press conference.
“Great relief,” is how UAW Local 3303 president Jamie Sychak described the reaction when he told his union members.
“Nobody had anything other than kudos and relief,” he said. “And we’re very thankful that things went the way that they ultimately should.”
Meanwhile, the DOE had more good news for the Butler Works. It awarded up to $75 million to the plant to reduce carbon emissions from its high-temperature furnaces by moving toward more efficient electric furnaces.
The trade-off for climate change
In exchange for the Cleveland-Cliffs jobs, the country has given up improved efficiency on the electric grid, according to Andrew DeLaski, director of the Appliance Standards Awareness Project, which advocates for energy efficiency.
“The risk here is that we’re doubling down on old technology and locking that in for equipment that lasts 30 years, 50 years,” he said. “That’s the missed opportunity.”
The DOE’s final rule would still save $14 billion in utility costs and reduce CO2 emissions by nearly 85 million metric tons from the electric grid. However, according to DeLaski’s group, just a third of the CO2 would have been saved by the proposed rule.
“The additional carbon dioxide emissions because of this weaker final rule will be another 165 million metric tons of carbon dioxide emissions over 30 years,” he said. “That’s a lot, and those are emissions that could have been avoided.”
Final rule may still have supply chain issues
A coalition of manufacturers, utilities and steel suppliers still is not sure if the industry will be able to comply with the standards outlined in the final rule.
NEMA, the National Electrical Manufacturers Association, calls the final DOE rule a “significant improvement,” in part because it gives industry five years to comply, up from three years in the proposed rule.
There is only one producer of amorphous steel in the U.S., which currently supplies roughly 5 percent of the transformer market, according to NEMA director of government relations Peter Ferrell.
He has doubts that the company can even meet DOE’s new lower standard to supply 25% of transformers.
“Can you practically scale 20% more within just a five-year timeline?” he said. “We just want to see how the math there is going to work.”
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