Most of us first heard about supply chain issues when the COVID-19 pandemic left store shelves empty. Shortages also affected electric utilities, but their attention to supply chains started years before and will continue into the future. For electric utilities, the pandemic just amped up the job of keeping the lights on in an industry already adjusting to the rapid rise in renewable energy and severe weather.
Electric co-ops are among those taking steps to manage immediate and long-term supply chain constraints, says Stephanie Crawford, regulatory affairs director with the National Rural Electric Cooperative Association. “This didn’t happen overnight,” she says. “Many of these dynamics started before the pandemic.”
Creating a supply-chain task force
Those dynamics include the fact that only one U.S.-based manufacturer produces the steel used to make transformers (equipment that regulates power levels). That constraint, coupled with a lack of workforce, meant transformer manufacturers could not keep pace with demand. Lead times for ordering transformers jumped from two months to two years.
It wasn’t just transformers in short supply, says Crawford. Electric co-ops also faced delays “for meters, conductors, utility poles, bucket trucks — all things needed to keep the system running.”
To reduce those backlogs, last summer the utility industry created a task force to work with the federal government to resolve supply chain slowdowns.
Incentives for manufacturing
The task force recommended several actions to help get utilities what they need. Among its suggestions was to provide incentives to encourage domestic manufacturing of steel for transformers. The task force also identified national trends and policies that could conflict with the utility supply chain.
The same lack of people to fill jobs also affects the making of materials needed by utilities. Any community wants its economic development efforts to attract major new employers. But a large new business could attract workers away from companies that supply essential utility equipment. The task force recommended incentives for utility-related work.
Electric vehicles, solar energy and broadband expansion can use some of the same materials needed by utilities. The task force recommended the government avoid disadvantaging utility work by favoring other projects.
According to Crawford, all these supply chain issues are causing utilities to rethink traditional business practices, and the logistics and procurement functions of electric utilities are getting increased attention.
“New strategies are needed to meet the cooperatives’ needs,” she says. “They’ve not needed to project the demand for transformers five years in the future because you could get a transformer in 60 days. Now, when it’s taking more than a year for the equipment to be available, they must look at it through a different lens.”
Utilities have been adapting to dramatic changes, says Crawford, from weather patterns to sustainable energy. Supply chain management is one of the latest twists.
“Electric co-ops are good at keeping the lights on,” says Crawford. “But these supply chain issues have made that job more difficult. Real investment needs to be made in domestic manufacturing and supply capabilities to make sure all utilities get the equipment they need.”