
In recent days, concerning news has emerged regarding the pipeline of new homes in the United States. According to the Commerce Department, the number of new home construction projects plummeted by over 11% in August. Simultaneously, a report from the National Association of Home Builders (NAHB) revealed that homebuilder confidence dipped for the second consecutive month in September.
While rising mortgage rates are contributing to the housing slump, there's another supply-side issue exacerbating the situation: a shortage of electrical distribution transformers. These unassuming green or tan boxes, often found near sidewalks or perched atop utility poles, play a crucial role in converting electricity from the grid into a usable form for homes.
John Kirk, Managing Director at Embrey, a multifamily developer in San Antonio, described the significance of these transformers. He emphasized that construction companies rely on a steady supply of transformers to avoid project delays and ensure homes have electricity. "It's one of your top questions you ask. You want to go meet with the utility provider and say, 'Hey, what's the story? What should we be expecting?'" Kirk explained.
However, the wait time for transformers has grown significantly. It has surged from three to four months to a staggering year-long wait. This shortage has been ongoing since 2018, when tariffs on Chinese transformers were imposed during the Trump Administration. Rose Quint of the NAHB pointed out that these tariffs led to a nearly 90% reduction in the number of transformers imported from China. To compound matters, the United States also imposed tariffs on the steel used for building transformers domestically.
The consequence? A remarkable 85% increase in transformer prices since the first quarter of 2018. This shortage doesn't just affect home construction; it also poses a challenge for modernizing the electric grid, a goal championed by the Biden Administration. Erin McLaughlin, Senior Economist with the Conference Board, highlighted the implications for key policies, including the Infrastructure Act, electric vehicle charging stations, and expanding renewable energy on the grid. All of these initiatives depend on a steady supply of electrical transformers.
In essence, the electrical transformer shortage underscores the interconnectedness of various industries, from housing construction to renewable energy and infrastructure development. Addressing this challenge will be pivotal in achieving these critical goals and maintaining the nation's growth and progress.
Source: marketplace.org