Elon Musk: The United States is currently short of chips, and a year later it will be short of power transformers, which are a key equipment in the power grid. In the process of transitioning to clean energy, the shortage of power transformers has become a stumbling block to the expansion of the US power grid.
Tesla CEO Musk is concerned about the energy prospects in the United States. In a recent podcast, he stated that there is a chip shortage in the United States, and there will be a shortage of power transformers in one year, and a power shortage in about two years. According to a report by the US Economic Review Council in June 2023, the United States is experiencing a severe shortage of power transformers. There are also very few skilled workers in the United States who possess welding, coil winding, transformer testing and other related skills. At present, the average delivery time has been extended to over one year, and the price has quadrupled compared to the 2020 level.
1. Current Status of the US Power Transformer Market
Hengfengshuai Electric EVA analysis shows that 70% of the power grid access and transmission and distribution facilities in the United States have aged; According to a report released by the US Department of Commerce in 2020, the average service life of transformers in the United States has reached 30-40 years, far exceeding the expected lifespan of 25 years. Driven by the strengthening of the power grid and the replacement of aging assets, the demand for power transformers in the United States is expected to increase by nearly 50% by 2030. The unexpected takeoff of the AI industry in 2023 has also led to a surge in data center construction. According to Sredhar Sistu, Vice President of AI Products at Schneider Electric, he previously told the media that, except for China, artificial intelligence currently accounts for about 4.3GW of global total energy consumption, and will grow nearly fivefold by 2028, reaching 13.5GW to 20GW. It is estimated that 30% -45% of the demand is in the United States. The current demand for power transformers in the United States mainly relies on imports to make up for it. With the transition to a cleaner power system, the power grid continues to expand, and the demand for power grid transformers has surged. If no further action is taken, the United States will face an insurmountable domestic supply shortage by 2030.
At present, the main participants in the US power transformer market include international large manufacturers such as ABB, Siemens, Schneider Electric, as well as some local manufacturers such as General Electric, Belt, and Proctor. As well as Chinese enterprises such as China Western Electric, TBEA, Zhejiang Shenda, Igor, and Hengfengshuai Electric, these manufacturers have a wide range of products, covering various application fields, from residential and commercial buildings to industrial and energy projects. At present, there are mainly single-phase pad mounted transformers, single-phase pole mounted transformers, three-phase pad mounted transformers, power grid main transformers and other power transformer products.
2. Opportunities for Chinese Enterprises in the US Power Transformer Market
China's power transformers have gone to sea, and the United States has become the second largest export market. The Biden government's accelerated investment in renewable energy and electrification is creating a large demand for expansion of distribution transformers. The bipartisan Infrastructure Act and Inflation Reduction Act, which have been passed in recent years, have provided hundreds of billions of dollars in incentive funds for the deployment of commercial and emerging clean energy technologies. As of June 2023, the Department of Energy Loan Project Office has issued over $100 billion in loan authorizations to help businesses deploy and expand innovative clean energy, advanced transportation, and tribal energy projects in the United States, and has established $250 billion in new loan authorizations to help restructure or reuse energy infrastructure and adapt to a low-carbon economy. The massive clean energy investment by the US government is also an opportunity for Chinese companies to go overseas. At present, the main sources of transformer imports in the United States are Canada, Mexico, and other countries, and there is also a significant import demand for power transformers produced in China. China is the country with the highest number of patent applications for power transformers worldwide. According to data from Smart Seed Statistics, as of December 2021, China's patent application volume accounted for nearly 83.5% of the global total patent application volume for power transformers, making it the largest technology source country for the global power transformer industry. According to data from the General Administration of Customs, as of March 2022, the cumulative export quantity of power transformers in China reached 790 million units, a year-on-year increase of 2.5%, and the export amount reached 9.03 billion US dollars, a year-on-year increase of 28.8%; Among them, the proportion of power transformers exported to the United States is about 10.2%, making the United States the second largest export market for power transformers in China.
3. The Challenge of the US Power Transformer Market to Chinese Enterprises
The US power transformer market has maintained a stable growth trend in the past few years, thanks to growing electricity demand and advanced technology and production processes. The main participants in this market include some international large power equipment manufacturers and small domestic manufacturers in the United States. In the coming years, the trend of the US power transformer market will focus on sustainable development and energy conservation and environmental protection. More and more governments and enterprises are investing in renewable energy and energy storage technologies to reduce their dependence on traditional energy. In addition, technological innovation and product upgrading of power transformers will also become an important trend in the market. Manufacturers will invest in new materials and technologies to improve the efficiency and performance of power transformers, reduce costs, and improve safety.
The competition in the US power transformer market may pose certain challenges to Chinese enterprises, but this does not mean that Chinese enterprises cannot successfully enter the market. In a fiercely competitive market, some challenges can be overcome, such as improving product quality and innovation capabilities, establishing a good brand image and customer service, etc. As long as Chinese enterprises can continuously improve their own strength and competitiveness, I believe they will be able to achieve success in the international market.
In summary, the US power transformer market will continue to grow, but it should be noted that this growth may be influenced by renewable energy technologies and policies
