Virginia’s Transformer Manufacturers Power Up

Delta Star, Inc,. Lynchburg

Transformers are an essential component for maintaining the national electric grid and ensuring continuous power in regions affected by aging components and sensitivity to storms and natural disasters. Beyond that obvious function, transformers also play an essential part in supporting growth across a range of emerging industries. From the increase in data center construction to the factories producing and charging stations powering electric vehicles, and from the robust renewables market to the increased installation of high-voltage DC networks, U.S. demand for transformers is at a record high. 

“The U.S. is back to making stuff… and we have helped enable that,” said Kevin Lowery, director of communications for Roanoke-based Virginia Transformer Corp. “In order to have any kind of manufacturing, you need transformers.”

The challenge, however, is that this combination of aging infrastructure and the unprecedented transformation of multiple energy-intensive industries has come fast and put transformer manufacturers in a ramp-up position. Several factors have driven the current and expected growth for the market:

• Aging U.S. electric infrastructure that necessitates equipment upgrades
• Changes to the regulatory environment, including federal legislation that funds infrastructure upgrades and incentivizes increased efficiency and reduced carbon emissions
• An increased emphasis on resiliency and durability in the wake of high-profile grid failures in Texas and the Carolinas
• Continued growth in the use of renewable energy sources
• Increased demand from high-growth industries that rely on transformers, including data centers and electric vehicle charging networks
• Reshoring initiatives focused on bringing domestic manufacturing back to the United States

Hitachi Energy, Halifax County

“Three years ago, none of us were talking about what we’re experiencing today,” said Steve McKinney, senior vice president of transformers, North America, at Hitachi Energy. The Swiss company operates transformer manufacturing facilities in Bland County and Halifax County. “We were making investments, but I don’t think anybody saw all the pieces of the puzzle coming together in the way that has dramatically increased demand.” 

The supply side of the equation also puts a strain on transformer manufacturing. High barriers to entry and capital needs have limited the number of domestic manufacturers, while major portions of production costs are tied to commodities, leading to significant price fluctuations. As a result, energy projects around the world are being scheduled around transformer availability. 

“I’ve been amazed at the lead times on these things,” said Will Clear, managing partner of Bristol-based Virginia Energy Strategies and former chief deputy director of the Virginia Department of Energy. “I’ve heard 24-month, 36-month lead times for some of the big transmission projects. This really does hamstring us from a development standpoint.”

“Investing in our human resources is another primary focus,” Keimig said. “We’re adding positions in manufacturing, engineering, and supply chain procurement, to name a few, in an effort to capitalize on market conditions.” 

Virginia Transformer has likewise prioritized hiring in order to fulfill the inquiries coming in at a record pace. “Just here in Roanoke, we’ve added about 200 jobs over the last year, and we’re looking by the end of this year to add probably another 100,” Lowery said.

Virginia Transformer Corporation, Roanoke

However, ramping up production isn’t as easy as hiring more people. It takes time to learn these skills.“

Transformer winding is a skill that follows a very standard manufacturing process, but it’s a skill that you can’t walk in and develop within a week,” McKinney said. “We have great training programs to accelerate the learning curve of our employees, but it can take six months to really learn this skill and be proficient at it. In some factories, it can take upwards of a year to be able to be left alone to do transformer winding.” 

As Virginia’s transformer manufacturers build up capacity, they’re also working to bring their suppliers along with them. 

For Virginia Transformer, inventory management has proven essential to maintaining its position as an industry forerunner in lead times. “As a privately held corporation, if there are certain materials that we might think could potentially pose a supply chain challenge, we go get an inventory of them,” Lowery said. He notes that suppliers have been supportive in providing this visibility. As he pointed out, “Suppliers love nothing more than to work with a company that’s growing. We’re in that enviable position.”

Hitachi’s international presence has provided access to materials that have kept its Virginia production steady. “Being a large consumer of critical materials, we have clear visibility in terms of the global supply chain,” McKinney said. “Some of the major materials that a lot of people were talking about, like grain-oriented steel, we have been able to secure because of our global footprint.” 

McKinney added that communication has proven critical to ensuring reliable access to essential materials. Hitachi has hosted Supplier Days to provide its upstream partners visibility into Hitachi’s production plans. “We brought everybody in and shared what is going on because, unless you are part of this industry and you can put all these pieces together, you really don’t understand the imbalance that’s now happening. The demand is far exceeding the supply. We are all in ramp-up mode. As a result, it’s important to communicate with suppliers — and customers — to make them aware that this isn’t just a one- or two-year cycle.”