Senators have introduced bipartisan legislation to try to boost production of distribution transformers by providing a 10% tax credit to U.S. manufacturers of the crucial equipment.
Electric cooperatives depend on an adequate supply of transformers to restore power after natural disasters, replace aging equipment and meet growing demand for electricity from data centers, electric vehicles and large apartment and housing developments, said Will Mitchell, a legislative affairs director at NRECA.
“There’s a huge need to replace what’s on the grid now combined with a big increase in demand for electricity expected in the coming years,” he said.
The Credit Incentives for Resilient Critical Utility Infrastructure and Transformers (CIRCUIT) Act, offered Thursday by Sens. Jerry Moran, R-Kan., and Catherine Cortez Masto, D-Nev., would extend the Advanced Manufacturing Production Credit to U.S. companies that produce distribution transformers.
NRECA CEO Jim Matheson said the bill would “help give domestic manufacturers needed certainty as they work to ensure a resilient national supply chain for electric cooperatives and other utilities.”
“We thank Sens. Moran and Cortez Masto for introducing this legislation, which is critical to strengthening the domestic energy economy and assisting co-ops in their mission to provide safe, reliable and affordable power to their members,” he said.
Tim Mills, president and CEO of ERMCO Inc., which manufacturers distribution transformers used by more than 90% of the nation’s electric co-ops, said he would definitely use the tax credit to step up production if Congress passes the bill. The Dyersburg, Tennessee-based company manufactured over 650,000 transformers last year and has the capacity to produce up to about 750,000.
“I think the chances for this tax credit to work are tremendous,” Mills said. “We’d redeploy this capital immediately into strategic investments to grow our output.”
The wait for co-ops and other utilities to receive single phase pole-mounted distribution and small pad-mounted transformers is largely back to normal levels now that the COVID-19 supply chain crisis has eased, he said. However, it can still take quite a while to get larger, three-phase transformers that serve data centers, factories or big apartment complexes.
“Those are still tight,” he said. “Supply is still being outstripped by demand.”
Demand for electricity is going to continue to grow, making the tax credit an important step to boost the supply of transformers for the future, Mills said.
“These investment funds are critical,” he said. “They will help us, and the entire industry, better evaluate supply and demand to ensure we build a long-term, sustainable electrical grid.”
Moran said the bill will “help the United States move closer to energy independence, provide jobs and keep up with rising demands.”
Cortez Masto said it “is critical for lowering energy costs, supporting energy resiliency, and strengthening our national security.”
Erin Kelly is a staff writer for NRECA.