CPS Energy mitigates the transformer gridlock to meet San Antonio’s housing boom

San Antonio is hot! The U.S. Census Bureau ranked the city tops in population growth. The National Association of Realtors lists the Alamo City among the 10 hottest housing markets for 2023. And like utilities across the U.S., CPS Energy is facing material and supply shortages to support all the growth.

“Since 2021, we have faced shortages for everything from copper cable to PVC pipe,” says CPS Energy Director of Commodities Procurement, Yvette Cardiel-Perez. “Last summer, the major issue became transformer shortages. There’s a huge demand for single-phase pad mount transformers—those green boxes you see near the curbs in subdivisions across town. Those bring the power to individual lots and homes, and they are in very short supply.”

Before the pandemic, the wait time for transformers could be measured in weeks. Now, the lead time can be up to 24 months. CPS Energy anticipates it’ll be 36 months for the process to normalize. Even as new homes and lots are energized each week, many builders or real estate developers are in limbo, waiting to get the transformers that have been ordered for their projects.

Supplies were limited first by a shortage of grain-based steel, then made worse by skilled labor shortages for manufacturers. Facing increased demand across the nation, manufacturers were forced to establish production limits for transformers based on historical orders by utilities, called allocations, to manage production capacities. 

CPS Energy first saw an impact last year when deliveries in the third quarter of 2022 dropped by sixty percent, compared to the first quarter.  Despite that decline in materials, the number of transformers installed decreased by only three percent in 2022 compared to 2021, and were more than twelve percent higher than pre-pandemic levels, highlighting the extreme boom in new homes being built in San Antonio.

To tackle the transformer shortage in new home construction, CPS Energy has:

• Added more / new suppliers and manufacturers to the vendor pool to increase the availability of transformer units. 
• Adjusted transformer specifications to increase available units.
• Refurbished / repaired / repurposed existing equipment to increase inventory.
• Hosted update sessions with the real estate community to keep them informed of shipments and progress.
• Established a waiting list online (voluntary) to increase transparency on the numbers of units and projects in the queue.
• Advocated for support from the Texas legislature as well as the U.S. Congress to incentivize increased manufacturing.
• Established a process for reviewing customer-identifier transformer suppliers. If a customer identifies transformers that meet CPS Energy specifications, we will purchase and install those transformers on the customer’s site.
• Created a new process to allow partial energization of some subdivisions, so developers/builders can start selling lots & building homes on in a portion of the development until all transformers are available.

These efforts are showing positive results.  CPS Energy has transformer contracts to source from three separate suppliers for units from nine different approved manufacturers, as well as 12 additional approved suppliers and one additional approved manufacturer.  There are more than 4,300 transformers ordered, with additional manufacturing allocations in CPS Energy’s name.  The first quarter of 2023 has had the highest number of transformer deliveries in a single quarter when compared to the last five years.  Scheduled deliveries for the next two quarters are even higher.

The situation remains concerning.  According to Cardiel-Perez, the grain-based steel shortage is critical to closing the transformer gap. With the limited steel available, competition from electric vehicle and generator manufacturing has made the situation more challenging.

In an effort to increase energy conservation and reduce carbon emissions, The Department of Energy (DOE) is encouraging a switch to amorphous steel for distribution transformers.  

“Amorphous steel is more energy efficient and a good change in the long-term, but given this alternative steel is less available than the currently used grain-oriented electrical steel, this requirement is likely to make a bad situation worse,” added Cardiel-Perez.  

A healthy supply of amorphous steel will take years to develop. Currently, only one U.S. manufacturer can produce this low-carbon intensity steel, and the majority is foreign-sourced.  

To address these concerns, CPS Energy reached out to the Texas Legislature and Congress in 2022, partnering with other utility members of the American Public Power Association, The Edison Electric Institute, and the National Association of Homebuilders, among others, asking for $1 billion to be made available from the Defense Production Act (DPA), to help alleviate the supply chain burden.  Unfortunately, this funding was not made available. However, utilities have made other funding requests and await a decision from the DOE to use the Inflation Reduction Act (IRA) as another financial source. 

The growth in San Antonio has showed few signs of slowing, and CPS Energy continues to explore every avenue to obtain more transformers to keep customer projects moving forward!

Call to Action: For questions about the partial energization process or how to submit information about a new transformer supplier, please reach out to our Customer Design & Delivery team at [email protected]. We are always available to discuss these options and collaborate on additional recommendations.