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Discussion On Issues Related To Electric Power And Energy In The United States

The aging of the U.S. power grid transformers has reached a critical point, with approximately 70% operating past their intended service life.

A report from 2020 revealed that the actual lifespan of transformers in the United States averages between 30 to 40 years, significantly surpassing their expected 25-year lifespan. With over 50 million distribution transformers on the U.S. grid, about 70% are currently in a state of "overdue service." Notably, much of the U.S. grid infrastructure was built during the 1960s and 1970s, rendering it increasingly vulnerable to extreme weather events like severe storms.

According to a report by the U.S. Department of Commerce, as transformers age, their reliability diminishes. Prolonged exposure to heat, vibration, electromagnetic induction, and mechanical stress gradually weaken the internal insulation materials' strength and conductivity, leading to failures and short circuits.

In June 2023, the U.S. Council on Economic Affairs published a comprehensive report examining the country's transformer industry. The report highlighted that in some areas of the United States, the lead time for transformers has extended from weeks to over a year, and transformer prices have skyrocketed by over 400% in certain cases. Since 2020, numerous electrification projects in the United States have been delayed or canceled, significantly impacting the progress of residential and commercial property developments. The lack of updates to critical components in the grid has also left it more vulnerable, reducing resilience to natural disasters or human errors.

The report identifies two primary reasons for the electricity supply shortages affecting U.S. businesses and private residences: first, the United States hardly produces the essential material for transformers, Grain-Oriented Electrical Steel (GOES), and second, the country excessively relies on large power transformer manufacturers from foreign countries.

The report calls for action, suggesting that given the critical role of transformers in modernizing the grid, the U.S. government could invoke the Defense Production Act to revive the domestic transformer production chain, reducing dependence on imports.

As the Chinese transformer market expands annually, the United States may become the second-largest export market for Chinese transformers.

Currently, the main sources of transformer imports into the United States are countries like Canada and Mexico, with significant demand for Chinese-made transformers as well. Data from the General Administration of Customs of China indicates that as of March 2022, cumulative exports of electric power transformers from China reached 790 million units, with a year-on-year growth of 2.5%, and export revenue amounted to $930 million, a 28.8% increase year-on-year. Among these, electric power transformers exported to the United States accounted for approximately 10.2%, making the United States the second-largest export market for Chinese electric power transformers.

Statistics show that internationally, China ranks second only to Mexico as the world's largest exporter of transformers, with a market share exceeding 10%. In 2022, China's total transformer exports reached $4.419 billion, marking a 20.81% year-on-year increase.

In China, due to mature technology, transformer manufacturers face fierce competition, resulting in low industry concentration and a fragmented landscape. Even for the top-ranked enterprise in this field, State Grid Corporation of China (SGCC), its market share in China is only 4.09%. Therefore, looking at the global market, international expansion presents a promising path for Chinese power companies.

According to related industry research reports, as developed countries like the United States and the United Kingdom grapple with the need for updating components such as transformers in their aging power grids, Chinese companies have the opportunity to compete in this vast market. Additionally, when China is actively participating in infrastructure development projects in Belt and Road Initiative countries, Chinese enterprises have a natural advantage in entering such markets.

The research report also predicts that by 2027, the Chinese transformer market's size will grow at a compound annual growth rate exceeding 4%, with export volume steadily increasing.

(Source: Red Star News)


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