Ohio’s U.S. Senators say new Energy Department policy threatens Cleveland

Cleveland Cavaliers and Cleveland-Cliffs steel manufacturer introduced the new Cliffs uniform jersey patch during a press conference at Rocket Mortgage FieldHouse, March 29, 2022. John Kuntz, cleveland.com

WASHINGTON, D. C. - Both of Ohio's U.S. Senators are asking the U.S. Department of Energy to reconsider proposed standards for electrical transformer production that would eliminate the market for grain oriented electrical steel produced by Cleveland-Cliffs, risking 1,500 jobs at the company's Zanesville Works and Butler Works plants.

Sen. Sherrod Brown, a Cleveland Democrat, and JD Vance, a Cincinnati Republican, last week joined more than 40 other U.S. Senators in a letter warning Energy Secretary Jennifer Granholm that discontinuing use of grain-oriented steel in electrical distribution transformers, as the rule proposes, would worsen shortages of the devices at a "strategically inopportune time."

According to Brown's office, Cleveland-Cliffs is the last remaining North American producer of grain-oriented electrical steel cores. Nearly 70% of the electrical steels that Cleveland-Cliffs produces are used in distribution transformer cores.

Commonly seen on utility poles throughout the country, the transformers lower the voltage of electrical power before it's distributed to customers.

In December, Granholm proposed new energy-efficiency standards for the transformers that would require the use of amorphous steel in almost all new transformers starting in 2027 because those transformers are more energy efficient than those made of the grain oriented electrical steel that Cleveland Cliff produces.

The Department of Energy estimated the switch would reduce U.S. carbon dioxide emissions over the next 30 years by an amount equal to the yearly emissions of 90 coal-fired power plants. It also estimated the rule would generate approximately $15 billion in energy savings nationwide over 30 years.

"By modernizing their energy-conservation standards, we’re ensuring that this critical component of our electricity system operates as efficiently and inexpensively as possible," Granholm said of the proposed transformer rule.

The lawmakers’ letter says the United States only has one domestic producer of amorphous steel, and the suggested switch to amorphous steel cores "would require this sole domestic supplier to rapidly scale operations from its current market share of less than five percent to accommodate the entire distribution transformer market."

They argue that would add to existing delays in producing the transformers, which are currently estimated at 18 months to two years.

"Between 2020 and 2022, average lead times to procure distribution transformers went from eight to 12 weeks to up to three years," the letter continues. "This multi-fold increase is directly impacting the electric power industry's grid modernization and reliability efforts, as well as its ability to respond and recover from natural disasters, posing challenges for communities that need to rebuild as well as new development."

The letter asks the energy department to instead "finalize a rule that does not exacerbate the shortage in distribution transformers and convene stakeholders across the supply chain to develop consensus based approach to setting new standards."

A statement issued Friday by Cleveland-Cliffs President and CEO Lourenco Gonclaves said his company's Butler Works and Zanesville Works are the only U.S. steel mills that produce both grain oriented electrical steel for transformers and non-oriented electrical steel for electric motors, including electric vehicles.

Eliminating its market for the grain oriented electrical steel would harm Cleveland-Cliffs’ ability to produce non-oriented electrical steel and create auto industry supply chain issues that could stunt advancement of U.S.-made electric vehicles, said the statement, issued by Brown's office.

"This transformer efficiency standard proposed by the Department of Energy threatens to regulate GOES out of the distribution transformer market," Gonclaves’ statement said. "Such an outcome would jeopardize the real progress that has been made at these mills in recent years and would fundamentally destroy the economics of continuing to produce GOES domestically."

Gonclaves said his company invested approximately $50 million in the plants over the past two years to increase its electrical steel production.

Sabrina Eaton writes about the federal government and politics in Washington, D.C., for cleveland.com and The Plain Dealer.

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