Shortages Galore Threaten Ability to Power, Heat and Cool Our Homes: Kiplinger Economic Forecasts

The energy industry not only powers our homes and businesses but the economy too. Given its critical role in the country’s infrastructure, our hugely-experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts coming in this sector (Get a free issue of The Kiplinger Letter or subscribe). You will get all the latest news first by subscribing, but we will publish many of the forecasts a few days afterward online. Here’s the latest…

One pandemic-era shortage that has not yet abated: Transformers, which are a crucial component of the electric grid that transfers power from one circuit to another. The shortage has been a headache for many sectors of the economy, resulting in delays for everything from new transmission infrastructure to new homes. One utility estimates the supply won’t normalize for at least two years and that the shortage could stretch out three years in a worst-case scenario.

There are only three U.S.-based suppliers of transformers, a majority of which are sourced from foreign countries. The U.S. also has a limited number of suppliers of key raw materials, most notably grain-oriented electrical steel.

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Heating and cooling units also experiencing shortages

Heat pumps and air conditioners are also in short supply this year after Uncle Sam strengthened certain efficiency regulations on January 1. 

Shortages are more likely in the southern half of the U.S. (which in this case includes California, Delaware, Hawaii, Maryland and Nevada) because installers can’t use manufacturer inventory from before this date, whereas those in the northern half of the country can.

Congress sweetened tax credits for energy-efficient home improvements this year, with up to $2,000 for a heat pump and $600 for an air-conditioner. But the IRS still hasn’t defined what efficiency ratings will qualify for the benefits. Still, high-end models are being snapped up and will be especially hard to come by.

This forecast first appeared in The Kiplinger Letter. Since 1923, the Letter has helped millions of business executives and investors profit by providing reliable forecasts on business and the economy, as well as what to expect from Washington.  Get a free issue of The Kiplinger Letter or subscribe.