Summarizer

The large transformer shortage has been a problem for years. Large transformer making is a craft, where the winding supports are made of hardwood, like furniture, and wound by hand. Then the windings go into a case that's an oil tank. The build teams aren't that big - 30-50 people. The main barrier to entry is that it takes people who know how to hand-build big transformers. Utility buyers want a supplier who's going to be around half a century from now, since these things last that long. Here's a summary of the market, from a transformer maker in China.[1] Here's an AI-generated fake video of large transformer manufacturing. It's about half wrong.[2] But right enough to be worth watching. I'd like to see the prompts for this. Virginia Transformer is the US's biggest maker of large transformers.[3] They advertise their "short lead times" of two years. The margins are low, and makers don't want to go idle between orders. This is a problem with much heavy machinery. It could be built faster, but when you catch up, everybody gets laid off and the factory sits idle. There goes your profit margin. [1] https://energypowertransformer.com/2025-u-s-power-transforme... [2] https://www.youtube.com/watch?v=ZVVCCG0KkaE [3] https://www.vatransformer.com/shortest-lead-times/

You'd think if it's causing this much of a problem, there would be money available.

It's a generic problem with flat demand in heavy industry. Shipbuilding, bridges, nuclear reactors - when the production backlog runs down and the factory goes idle, the factory dies. So do the companies that feed specialized parts into the process.

The head of Newport News Shipbuilding and Dry Dock, which builds the US aircraft carriers, once ran a full page ad announcing that if Congress would order two carriers at once, instead of one at a time, they'd throw in a third carrier for free. The total shutdown between jobs was that expensive for them.

That reminds me of the restaurant using its liquidity to prepay its dry aged steak supplier. https://commoncog.com/cash-flow-games/#3-pre-payments-in-the... Liquidity is expensive. Selling a carrier one at a time is like a retail business where you're expected to hold onto stock. If you don't build up an inventory to sell from and just sell one unit, you have to markup the price to cover the cost of the factory when it is idle.

You can have the government buy the equipment with the economy goes down, or you can have the government manufacturing it and letting the factory go idle when demand dries down. But amplifying the orders just makes the problem worse.

> Put the spares in a strategic repository and sell them at “cost” to whoever wants them. That means that eventually the factory goes idle, when all the demand is serviced by the spares.

I'm not sure that this helps. The problem expressed, I think, that it is not useful to scale up production quickly (or perhaps at all), because a factory catching up on all of their orders means that the factory goes idle. Idle factories can't afford to pay wages, so they lay off some or all of the workers -- and those folks go and find different jobs. And when they leave, they take their institutional knowledge with them. So the sustainable goal is to never be idle, and the way to accomplish this is to never catch up. For an example of how idle factories can go sideways, look at the Polaroid film story: Polaroid closed. Everyone left. Some investors with a big dream eventually bought many of the physical assets that remained. But owning some manufacturing equipment didn't help them much because the institutional knowledge of producing Polaroid film had already evaporated. They had to largely re-invent the process. (And they've done a great job of that, but it's still not the same film as the OG Polaroid was.) --- So anyway, suppose the government steps in and simply artificially multiplies transformer orders x2, and pays them fairly for this doubled production. Since transformers are tangible things and we can't just spin up more AWS instances to cover demand, the immediate result is that the "short" lead time on new orders has increased from 2 years, to 4. That's not seeming to be very ideal. It seems to amplify the problem instead of resolve it. I suppose that the government could also offer safeguards that would help protect the businesses (including suppliers for parts) once they eventually catch up on orders, and that this might motivate them to scale production sooner instead of later (or never). Which -- you know -- that isn't unprecedented. As an example: The Lima Army Tank Plant, in Lima, Ohio, is place where I've spent a fair bit of quality time. It still exists and continuously has employees largely because the institutional knowledge of how to build tanks (and a few other war machines) is considered to be too important to lose. During lulls, it mostly just sits there on its expansive site, loafing along repairing stuff that comes in, and waiting for the day when things to turn bad enough that we need to start increasing our number of tanks again. It needs to keep operating (at any expense), and so with the magic of the government money-printing machine: It does. But it's one of the most actively depressing industrial sites I've ever been to; like the life just gets sucked right out of you before even getting past the entrance gate. We can certainly extend that kind of thing to transformer production. But should we?

Lead times increasing to four years doesn't necessarily mean that every order will take that long. Since the additional orders are just there to cover idle periods, the government could omit an expected delivery time so regular orders don't get delayed.

I think that would mean that the factory would switch from operating at 100% capacity (and never catching up), to 100% capacity (and never catching up). For that kind of sameness, it seems like it'd be easier to do nothing at all.

I think the article has things backwards. It's the shortage of stable demand that is holding back the building of transformers. A transformer factory that can make reliable, efficient, large transformers takes a long time to create because a lot of it relies on institutional memory. But it can be destroyed much more quickly by adverse market conditions and impatient investors. Remember that the product has a typical lifetime measured in decades, there are huge numbers of large power transformers that have been in near continuous operation for over half a century. When one of those fails it is often more economical to repair it than replace it with a new one but that depends on there being institutions that understand what was done fifty years ago. All this requires the opposite of modern move fast and break things investing.

I don't understand: is it illegal to buy transformers from China? It looks like they are building them like crazy, and are available for sale: E.g., https://lindahongli.en.made-in-china.com/product/SAapQolWVUY... That's in the ballpark of the Heathrow transformer that blew, I think. I understand they will be not cheap, with tariffs and all, but nothing the Magnificent 7 or Heathrow could not afford. It seems to me that (as the article points out) that production facilities are pretty old and production COULD be much more automated, and products improved if there was a will. However, "Now those firms are seeing a rise in demand for transformers alongside the buildout of data centers for AI, but remain unsure if the trend will continue, says Gonzalez Isla. “Transformer companies aren’t going to open new plants only to shut it down after 10 years of business,” she says." And THAT seems to be the crucial difference here between the transformer industry and, say, NVIDIA.

An article that deeply buries the lede under elementary facts about electrical transmission. Transformers are made in specialized factories and use specialized components made in even more specialized factories. Expanding production requires not just immediate demand but commitment to future demand because a factory is a very expensive thing. The big thing is that increased demand often involves a demand that won't continue for a long period of time. You could see the same thing with both masks and vaccines during covid - ramping up ten factories to meet a temporary demand would be very expensive.

transformers are infrastructure, 100% duty cycle with a significant overload capacity that can be 3 times name plate, right there with dams and bridges, and if one developes a fault, realy bad things happen and you get a crater. There very nature makes them imensely heavy and very compact, all of the equipment used to form the parts is gargantuan, and materials to build them come in units that must be moved by house sized forklifts, consider changing a tire on such a forklift. Remember that the largest transformers travel on the heaviest rail cars, specials, these things are way heavier than anything else per ft³. Which gets us to cold,warm, or hot idle, or decomisioning, which are your choices when a huge factory has no work, hot idle means limited production, warm means some of the guys hang out and tinker with stuff, cold means, locked up,no employees but security, as decomisioning something like this has strategic considerations, or should.