Input Stories

U.S. power companies are finding it increasingly difficult to get the large transformers they need to move electricity long distances—and the Department of Energy should step up to help them, the Government Accountability Office said this week, according to E&E News’ ENERGYWIRE (subscription).

What’s going on: A “GAO report called on DOE to create a plan, with deadlines, to overcome growing delays and difficulties U.S. utilities are facing in getting new large power transformers that are required to move electricity across more than 160,000 miles of U.S. high-voltage lines.”

• Most of the transformers are imported from overseas, and there is still a shortage due to pandemic-related supply chain disruptions.
• In some cases, delivery times have more than doubled, and the largest of the transformers can cost up to $10 million.

Why it’s important: “Transformers are critical for the future energy mix, as they are needed to create a larger grid for increased wind and solar generation, according to analysts.”

• In 2027 the demand by North American power companies for large transformers will likely be about twice what it was in 2020, according to the DOE.

What can be done: The DOE should create a plan to get more power companies to take part in voluntary programs to loan out spare large transformers during emergencies, the GAO recommends.

• The largest of these sharing agreements, the Edison Electric Institute’s Spare Transformer Equipment Program, had 57 participating utilities as of March.
• Thirty-one utilities in 28 states have signed onto a grid program to furnish spare transformers during cyberattacks or natural disasters.

The challenges: “[S]hortages of skilled manufacturing craftsmen able to build the transformers’ complex windings are a significant challenge … [DOE] said it is working on expanding apprenticeship programs to address the issue.”

Our take: “Transformers and transmission lines are critical to meet our growing energy security needs,” said NAM Director of Domestic Economic Policy Brandon Farris.​​​​​​

• “The NAM will continue working with the DOE and others to ensure that current and future needs are met, including developing the next generation of the manufacturing workforce and breaking down permitting barriers to expedite the buildout of our grid.”

Manufacturing employment declined in July, marking the third decrease of 2023, according to the Bureau of Labor Statistics.

What’s going on: Jobs in manufacturing dipped by 2,000. Year to date, the sector has added just 11,000 employees, a significant slowdown from its pace of 385,000 in 2021 and 390,000 in 2022.

• However, the number of workers in the industry in July—12,985,000—is just short of the number in February, 12,988,000. The latter was the most since November 2008.
• Overall, the economy added 187,000 jobs in July, coming in under expectations, according to Yahoo Finance.

Wages: Average hourly pay of production and nonsupervisory staff in manufacturing increased 0.3% in July to $26.46, with 5.3% growth in the past year. 

Where employment is up: In July, manufacturing’s largest employment gains were in transportation equipment (up 5,600), computers and electronic products (up 2,500), miscellaneous nondurable goods (up 1,800), primary metals (up 1,700), miscellaneous durable goods (up 1,300) and nonmetallic mineral products (up 1,000).

The NAM says: “Total manufacturing employment has remained relatively resilient despite a challenging economic environment in the sector, including weaker demand, production and an uncertain outlook,” said NAM Chief Economist Chad Moutray.
 

A persistent shortage of construction workers in the U.S. is slowing the completion of everything from single-family homes to major infrastructure projects, according to CNBC.

What’s going on: To meet labor demands this year, “construction firms will need to attract an estimated 546,000 additional workers on top of the normal pace of hiring,” CNBC reports, citing data from Associated Builders and Contractors.

• “The construction industry averaged more than 390,000 job openings per month in 2022, the highest level on record, while unemployment in the sector of 4.6% was the second lowest on record.”

Why it’s important: The industry’s labor shortage is not likely to be resolved any time soon. When combined with rising materials costs, it will only worsen the backlog of projects, which is already at a four-year high.

What’s needed: The bipartisan infrastructure bill of 2021 allocated money for projects, but not for “enticing new workers … or training” them, according to CNBC. Another component of the solution: immigration reform, a policy the NAM has long advocated.

• “More money is going to need to be spent on training additional workers, bringing people into this industry,” a source told CNBC.
• Said another, “We should also be looking at ways to allow more people to lawfully enter the country and work in construction careers, whether that’s a temporary work visa program that’s specific to construction, or broader comprehensive immigration reform.”

Our take: “The record manufacturing construction activity seen in the U.S. is further straining an already tight labor market,” said Chad Moutray, chief economist at the NAM and director of the Center for Manufacturing Research at the Manufacturing Institute, the NAM’s 501(c)3 workforce development and education affiliate.

• “Leaders in the sector are trying to think of ways to differentiate themselves in the competition for talent. Such pressures—along with changing demographics—are likely to keep workforce challenges front and center over the coming years.”

The U.S. and Europe are working to address “China’s accelerated push into the production of older-generation semiconductors,” Bloomberg (subscription) reports.

What’s going on: Last year, the U.S. imposed restrictions on the export of certain advanced technologies to China. Beijing has reacted by investing heavily in building facilities making older chips that do not face such U.S. restrictions.

• Legacy chips—those produced using 28-nanometer-and-larger equipment—remain critical in the global economy as components of everything from electric vehicles to military devices.
• China is on track to build 26 semiconductor factories through 2026, while the U.S. is forecast to construct 16 facilities “that use 200-millimeter and 300-mm wafers.”

Why it’s a problem: “Senior EU and U.S. officials are concerned about Beijing’s drive to dominate this market for both economic and security reasons, [sources] said. They worry Chinese companies could dump their legacy chips on global markets in the future, driving foreign rivals out of business…”

• If that were to happen, Western firms could become reliant on China for the chips, the sources say, and that could pose a national security risk.

Importance of legacy chips: The global pandemic demonstrated that older-model semiconductors remain important, as chip shortages hit companies’ bottom lines.

• The U.S. and Europe have been trying to expand their own chip production to avoid a repeat. Efforts have included the 2021 CHIPS and Science Act, which set aside $52 billion to bolster domestic semiconductor manufacturing in the U.S.

​​​​​​​A problem to solve: “Commerce Secretary Gina Raimondo alluded to the problem during a panel discussion last week at the American Enterprise Institute. ‘The amount of money that China is pouring into subsidizing what will be an excess capacity of mature chips and legacy chips—that’s a problem that we need to be thinking about and working with our allies to get ahead of,’ she said.”

The Department of Energy is loosening proposed energy-efficiency regulations for gas cooktops after reviewing data submitted by one of the NAM’s trade association partners and a utility company, POLITICO (subscription) reports.

What’s going on: “In a notice of data availability to be published in Wednesday’s Federal Register, DOE floated less stringent efficiency requirements for gas stoves. The initial proposal called for a consumption limit of 1,204 … British thermal units, or kBtu, per year, down from the baseline estimate of 1,775 kBtu per year. But the new proposal raises those figures slightly. Now DOE is proposing a limit of 1,343 kBtu per year, down from a recalculated baseline of 1,900 kBtu per year.”

• The Association of Home Appliance Manufacturers and PG&E provided the DOE with data on cooktops with higher consumption rates, which the agency had not used in its initial efficiency testing.
• “Other comments led DOE ‘to better understand’ what features consumers want in a gas stove, including multiple high input rate burners and continuous cast-iron grates,” POLITICO reports.

Why it’s important: Manufacturers would be required to spend more than $2.5 billion to comply with the originally proposed rules, according to the DOE’s own estimates. However, consumers would save just 12.5 cents a month in energy costs.

• The mandates would have been so strict as to make 96% of gas stoves on the market noncompliant.

What Congress has done: In June the House passed the Save Our Gas Stoves Act, which would prevent the DOE from advancing its unworkable stove requirements.

What we’re doing: The NAM has held high-level discussions with policymakers on the importance of feasibility, affordability and consumer choice in rulemaking.

• To that end, in June the NAM and members of the NAM’s Council of Manufacturing Associations and Conference of State Manufacturers Associations created the Manufacturers for Sensible Regulations, which aims to combat the recent regulatory onslaught by federal agencies.

The NAM says: “Manufacturers depend on regulatory clarity and certainty,” said NAM Managing Vice President of Policy Chris Netram.

• Throughout the year, the Department of Energy has proposed an unprecedented slew of regulations, and many were aimed at home appliances. The DOE is now taking steps toward a solution that is less likely to raise production costs significantly for manufacturers, and less likely to reduce the available features, performance and affordability for consumers.”

As most of the world grapples with inflation, China is facing deflation that could push it into “an economic trap,” according to The Wall Street Journal (subscription).

What’s going on: “Prices charged by Chinese factories that make products ranging from steel to cement to chemicals have been falling for months. Consumer prices, meanwhile, have gone flat, with prices for certain goods—including sugar, eggs, clothes and household appliances—now falling on a month-over-month basis amid weak demand.”

• China’s economy is growing, but slowly, and the government recently announced a series of stimulus programs to help.

Parallels with Japan: While most economists see China avoiding a prolonged recession, some “see alarming parallels between China’s current predicament and the experience of Japan, which struggled for years with deflation and stagnant growth” in the 1990s, following collapses in stock market and real estate value.

• If Japan’s fate were to befall China, the latter would face another hurdle: the usual methods for combating these problems would be either unpopular or toothless “due to the country’s heavy debt load.”

​​​​​​​ A mixed bag: A long period of lower prices in China could help bring down inflation elsewhere in the global economy, including the U.S.

• But … “[a] deflationary spell in China would also likely mean weaker Chinese demand for food, energy and raw materials, which big chunks of the world rely on for export earnings.”

Effects of uncertainty: And the longer that prices fall and stay down, the more entrenched deflation becomes—making debts “harder to bear and profits and incomes fall. Companies shed workers to fatten shrinking margins.”
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Manufacturing job openings inched down in June, U.S. Bureau of Labor Statistics data showed, and manufacturers continued to see business challenges in July, according to the ISM® Manufacturing Purchasing Managers’ Index®.

What’s going on: Open positions in the manufacturing sector declined approximately 4.28%, to 582,000 in June from 608,000 in May. Meanwhile, economic activity in the manufacturing industry declined for the ninth month in a row in July.

• While the Manufacturing Purchasing Managers’ Index was 46.4 in July, up from 46.0 in June, any number under 50 indicates contraction.
• In employment, durable goods job openings decreased to 356,000 in June from 379,000 in May. In nondurable goods, openings fell to 226,000 from 229,000 in the same period.

The details: New orders (up to 47.3 from 45.6) and production (up to 48.3 from 46.7) declined more slowly in July, according to the ISM®.

• However, employment fell to 44.4 from 48.1, and exports declined to 46.2 from 47.3.

Hiring: Manufacturing’s net hiring—hires minus separations—in June was 6,000, the same as the pace in May.

• Job openings in the sector remained above pre-pandemic levels.

A new Commerce Department office tasked with dispensing tens of billions of federal funding for domestic semiconductor manufacturing faces a challenging job, according to Roll Call.

What’s going on: “The experts at the CHIPS program office are charged with enticing the world’s largest chipmakers to the U.S. to fashion cutting-edge semiconductors used in weapons and supercomputers, as well as in more ordinary devices like thermostats. The goal is to break the dependence that many American manufacturers of missiles, spy satellites, telecom gear and medical devices have on suppliers primarily based in Taiwan and South Korea.”

• Congress allocated $52 billion for the effort last year.

Why it’s important: “Deploying taxpayer funds and the federal government’s power puts the department and the CHIPS office in a unique position of executing a novel industrial policy: one focused on both national security as well as economic well-being, and one that is expected to back manufacturing plants as well [as] research and development efforts.”

• In recent decades, the most successful U.S. industrial policy interventions have been similar to this one: funding for “high-risk, high-reward” R&D, according to a Peterson Institute study cited by Roll Call.

Making it count: Sens. Mark Warner (D-VA) and John Cornyn (R-TX) are adamant that the money must be doled out judiciously.

• “This is not an economic proposition,” Sen. Cornyn said. “It’s obviously important from an economic standpoint, but national security is the main reason why Sen. Warner and I undertook the legislation.”

​​​​​​​​​​​​​Keen interest:  The new office has received more than 400 statements of interest from semiconductor manufacturers. Preliminary applications will be accepted starting in September.

• Top chipmakers, including Intel and others, “have indicated they may invest as much as $400 billion in the U.S. provided they get some support from the government.”
• Six expert teams will review the applications and decide on the amounts each firm will receive. National security experts will weigh applications based on companies’ security measures and supply chain resiliency capabilities.

The NAM says: “Bolstering domestic chip manufacturing is a security and economic imperative for the U.S.,” NAM Director of Domestic Policy Julia Bogue said.

• “That’s why the NAM supported passage of the CHIPS and Science Act and continues to advocate for actions that will see the U.S. manufacturing more semiconductors.”

Regulatory inertia on self-driving cars is putting manufacturers in the U.S. at a disadvantage, but Congress can help by expanding automakers’ ability to test and ultimately sell the vehicles, industry advocates said at a House Energy and Commerce Committee hearing Wednesday, according to ABC News.

What’s going on: “Currently [automated vehicle] manufacturers can deploy a maximum of 2,500 self-driving vehicles for testing, provided they have permission from the National Highway Traffic Safety Administration. AV advocates have complained that the limits represent a bottleneck that is holding back the growth of the industry at a crucial time.”

What’s being requested: One of the bills considered during Wednesday’s markup is an updated version of a 2017 measure on AV regulations that passed the House but stalled in the Senate.

• AV advocates point to data that shows reports of accidents involving these cars are exaggerated and the cutting-edge safety technology can be more reliable than human drivers in avoiding crashes.
• The issue of liability in case of an accident, however, remains a major point of contention in legislative progress. “Each one of these [crashes] is still going to be subject to a plaintiff’s lawyer, an insurance company and a defense lawyer,” Rep. Kelly Armstrong (R-ND) said. “And until we’ve figured that out, this is just a science project.”

Safety data: An analysis of the first 1 million miles of AV use by Cruise AV—the self-driving vehicle unit of General Motors—showed the cars to have a significantly better safety record than human drivers, CEO Kyle Vogt said on an earnings call this week.

• There were 54% fewer collisions and 92% fewer crashes in which the AV was at fault, Vogt said.

The last word: “The expansion of AVs into our national transportation system is an opportunity to lead by enhancing safety on our roadways, improving transportation mobility and increasing efficient goods movement across our strained supply chains,” said NAM Director of Transportation Policy Ben Siegrist.

• “Manufacturers are on the cutting edge of vehicle technology research and development, and improving the federal regulatory landscape is a necessary step to grow the American AV industry into a global economic engine.”

The Senate voted overwhelmingly to create a Nuclear Fuel Security Program aimed at bolstering U.S. supplies of enriched uranium, according to the Senate Committee on Energy and Natural Resources.

What’s going on: On Thursday, the Senate voted 96–3 to include Sen. John Barrasso’s (R-WY) Nuclear Fuel Security Act amendment in next fiscal year’s National Defense Authorization Act.

• The “[a]mendment … directs the Department of Energy (DOE) to prioritize activities to increase domestic production of low-enriched uranium (LEU) for existing reactors and accelerate efforts to ensure the availability of high-assay, low-enriched uranium (HALEU) for advanced reactors,” according to the committee press release.
• The bipartisan measure was introduced in February by Sens. Barrasso, Joe Manchin (D-WV) and Jim Risch (R-ID); in May, it was passed by voice vote.

Why it’s important: Most of the advanced nuclear reactor concepts set to come online in the next few years require HALEU—and Russia is the only viable commercial supplier, according to E&E News’ ENERGYWIRE (subscription).

• “Russia now supplies 24% of our enriched uranium imports,” Sen. Barrasso said before the committee on Thursday. “We spend nearly $1 billion each year on Russian uranium. Russia uses these revenues to fund its invasion of Ukraine. Here in America, we have the resources to fuel our own reactors. My amendment authorizes the Department of Energy to take the steps necessary to expand U.S. nuclear fuel production.”

​​​​​​​The NAM’s role: The NAM has strongly advocated for the development of nuclear energy, which will play a critical role in U.S. energy security and decarbonization efforts.

• As NAM President and CEO Jay Timmons told Congress in June, “Nuclear energy can help the U.S. generate more clean energy, stabilize our grids and improve our energy security.”