Siemens Energy is expanding its Charlotte and Raleigh operations to address the nationwide power transformer shortage, the company announced last week.
The project brings an investment of $149.8 million, according to a statement from Gov. Roy Cooper. The Mecklenburg County facility will be the company’s first large power transformer manufacturing site in the United States.
The company is also expanding its existing grid technology operations in Wake County.
Large power transformers, or LPTs, are key to transmitting electricity across long distances and stabilizing the transmission. Each large power transformer is custom-built and around the size of a standard school bus, according to Siemens Energy.
LPTs are expensive and difficult to transport, and many in use are beyond their peak age, the federal Office of Electricity wrote. According to Siemens Energy, domestic transformer supply only meets 20% of the U.S. LPT demand, and lead times are up to five years.
That customer demand is what drove this expansion in North Carolina, Siemens Energy spokesperson Jake Rubin said.
The project will create 475 permanent jobs in Charlotte and 84 jobs in Raleigh, as well as 285 temporary construction jobs in Charlotte, according to Rubin. The average salary for the new positions at the transformer plant in Mecklenburg County will be just over $87,000, an increase from the county’s current average wage at almost $85,000.
The company will begin building the factory this year. Siemens Energy plans to begin transformer production there in early 2026. Initially the facility will be able to produce 24 transformer units a year, and then increase to 57 transformer units at full capacity, according to Rubin.
Most of the products will be bought and sold within the U.S., Rubin said. Utility companies would reserve units like LPTs years in advance, he said.
A location in Kansas was the other finalist in the decision, according to N.C. Commerce.
Rubin said the workforce talent and availability in Charlotte was a major factor in the decision, as well as the company’s previous success in the area with existing operations.
He said another plus was the investment from N.C. Railroad Company, which plans to put $100,000 towards upgrades that will help Siemens Energy ship out products faster. The facility currently has industrial tracks so employees can load equipment within the building.
The expansion will produce more than 50 rail cars per year at build-out and help grow North Carolina’s energy and electric-vehicle industries, according to NCRR.
On a national level, President Joe Biden administration’s Inflation Reduction Act also influenced the decision, Rubin said. The law increases investment in energy infrastructure and renewable sources of energy.
“It created an atmosphere and market where this expansion was possible,” Rubin said.
Daniel Bresette, president of the Environmental and Energy Study Institute, said the law “absolutely changed the atmosphere” of the energy sector, and one of its goals was to promote domestic manufacturing.
“If the investments from it take place, we will have a different grid,” he said.
But for investments like renewable energy, many of those will require upgrades to what he said is a “pretty old” grid. That will require transformer production, he said, describing LPTs as the grid’s “workhorses.”
Siemens Energy’s press release said studies predict a quarter of global renewable projects are in “jeopardy” from long transformer lead times, supply-chain issues and a shortage in production.
The U.S. Government Accountability Office released a 2023 report saying the Department of Energy needs to do more to address the transformer shortage, such as ensuring a spare reserve of transformers. This would help assuage worries about LPTs being vulnerable to natural disasters and human attacks, the report said.
Utility companies said supply chain constraints are the biggest hurdle to obtaining transformers, such as long manufacturing lead times and labor and material shortages, according to the report.
The state approved a Job Development Incentive Grant that also helped facilitate the expansion. The agreement would use new tax revenue to potentially reimburse Siemens Energy up to $6.9 million over 12 years if the company meets incremental job creation and investment targets.
Because that reimbursement is higher than the grant statute’s general maximum ratio of withholdings, the EIC approved a special finding to pass the grant in its meeting on Feb. 13.
Asked why the state decided on a higher amount of incentives, David Rhoades, communications director of N.C. Commerce, cited competitive offers from other locations.
“It was our evaluation of what was necessary to put forward an offer with enough value that the company saw that it was the better choice to make,” he said.
The agreement will also direct $2.3 million to the state’s Industrial Development Fund – Utility Account to help fund infrastructure upgrades in rural counties.
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