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The Inflation Reduction Act is already transforming America. But is it enough?
In the late spring, a scene happened that might have once — even a few years ago — seemed unimaginable.
Senator Joe Manchin and Energy Secretary Jennifer Granholm visited the town of Weirton, West Virginia, to celebrate the groundbreaking of a new factory for the company Form Energy. The factory will produce a new type of iron battery that could eventually store huge amounts of electricity on the grid, allowing solar and wind energy to be saved up and dispatched when needed.
Manchin was clear about why everyone was gathered in Weirton. “Today’s groundbreaking is a direct result of the Inflation Reduction Act, and this type of investment, in a community that has felt the impact of the downturn in American manufacturing, is an example of the IRA bill working as we intended,” he said.
It’s been nearly a year since the Inflation Reduction Act, President Joe Biden’s flagship climate law, passed. The law is successful. It is transforming the American energy system. And the Biden administration is implementing it as fast as it can: Since the law passed, the Treasury Department has published nearly three dozen pieces of complicated rules explaining how the IRA’s billions in subsidies can actually be used.
But is the IRA successful enough? The pace and scale of the climate challenge remains daunting. A recent report from the Rhodium Group, an energy-research firm, found that the United States would only meet its Paris Agreement goal of cutting carbon emissions in half by 2030 with more aggressive federal and state policy.
Here are some broad observations about how the IRA — and the broader project of American decarbonization — is going:
Politically, environmentally, no matter how you look at it: The power sector is the thumping heart of the I.R.A. Because engineers know how to generate electricity without producing carbon pollution — using wind turbines, solar panels, nuclear plants, and more — the sector is central to the law’s implicit plan to decarbonize the American economy, which requires, first, building as much zero-carbon electricity infrastructure as possible, while, second, shifting as much of the rest of the economy to using electricity — as opposed to oil, gas, or coal — as possible.
The electricity industry is also the site of perhaps the law’s most powerful climate policy — and its only policy tied to a national emissions-cutting goal. The law will indefinitely subsidize new zero-carbon electricity until greenhouse-gas pollution from the American power sector falls 75% below its 2022 levels. That means these tax credits could remain in effect until the 2060s, according to an analysis from the research firm Wood MacKenzie.
This was a first for American environmental law, and it remains poorly understood by the public. Even some experts claim that the electricity credits will phase out in 2032 with the I.R.A.’s other subsidies — when, in fact, 2032 is the earliest possible year that they could end.
Which is all to say that it’s early days for understanding the I.R.A.’s effect on the power sector. The data is provisional.
Yet the data is … good. Better than I expected when I started writing this article. The overwhelming majority of new electricity generation built nationwide this year — some 83% — will be wind, solar, or battery storage, according to federal data. Although that mostly reflects projects planned before the IRA was passed, it’s still a giant leap over previous years, and it suggests that the law might be giving clean electricity a boost at the margin:
The solar industry, in particular, is surging. The industry just had its best first quarter ever, with rooftop installations booming and some big utility-scale solar farms finally coming online.
But solar can’t power the entire grid, and other renewables are having more trouble. I’m particularly worried about offshore wind. To build a new offshore-wind project, companies bid for tracts of the ocean floor in a government-run auction. Yet many of those bids failed to account for 2021 and 2022’s rapid inflation, and some developers are now on the hook for projects that don’t pencil out. Most outside analysts now believe that the Biden administration will fall short of its goal to build 30 gigawatts of offshore wind by 2030.
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The boom in electric vehicle and battery manufacturing is clearly the I.R.A.’s brightest spot. (The two industries are one and the same: If you have a giant battery, you’re probably going to put it in an EV; and about a third of every EV’s value comes from the battery.)
Since the IRA passed, 52 new mining or manufacturing projects have been announced, representing $56 billion in new investment, according to a tracker run by Jay Turner, a Wellesley College professor. If you zoom out to all of Biden’s term, then more than $100 billion in EV investment has been announced, which will create more than 75,000 jobs, according to the Department of Energy.
It remains to be seen, however, whether this investment will produce the kind of durable, unionized voter base that the Biden administration hopes to form. So far, much of this investment has flowed to the Sunbelt — and in particular, to a burgeoning zone of investment from North Carolina to Alabama nicknamed the “Battery Belt.” These states are right-to-work states with a low cost-of-living, like much of the states that have absorbed manufacturing investment since the 1980s.
This might make Republicans think twice about undermining the IRA, but it might also be a missed opportunity.
In order to cheaply decarbonize its grid, America needs better power lines. Building long-range, interregional electricity transmission will allow the country to funnel clean energy to where it’s needed most. According to a team led by Jesse Jenkins, a Princeton engineering professor, 80% of the IRA’s carbon-reduction benefits could be lost if the United States doesn’t quicken the pace of new transmission construction. (Other models are less worried.)
Yet the effort to build more power lines — and the broader campaign to reform some rules governing permitting and land use, especially the National Environmental Policy Act — is probably over, at least in this Congress. Republican lawmakers figured out that Democrats are desperate for transmission reform, and they were prepared to make the party pay a high price for it — too high a price for much of the caucus. The bipartisan deal to raise the debt-ceiling also contained many of the moderate permitting reforms that Democrats might have accepted as part of a broader bargain over transmission.
Democrats are now stuck hoping that the Federal Energy Regulatory Commission, or FERC, will make smaller, more technocratic improvements to the transmission process when they take a majority of the commission’s seats early next year.
The biggest programs in the IRA target mature technologies, like solar, wind, and EVs. But the law is full of unheralded programs meant to encourage the development of early-stage climate technologies, such as sustainable aviation fuel. By encouraging technological progress, these programs could abate hundreds of millions of tons of carbon a year in the decades after 2030. They may prove especially important at reducing emissions outside the United States, according to a new analysis from Rhodium Group.
Which is to say that they could be — from a world-historic perspective — some of the law’s most important policies. But for now, few of these programs have been implemented, and we don’t really know how they’re going to go.
Some of them may also be devilishly hard to set up. My colleague Emily Pontecorvo has reported on the difficulty of setting up the tax credits for green hydrogen, which are some of the law’s most generous. If successful, the credits could give the U.S. a major new industry to tackle the decarbonization challenge; if unsuccessful, they could screw up the American electricity system.
Right now, most of the law’s consumer-facing tax credits are continuations of old policies — such as the longstanding subsidy to install rooftop solar — rather than something new. Perhaps the most expansive subsidy that consumers have seen so far is the new $7,500 tax credit for leasing an electric vehicle.
But many more programs will eventually come, including the IRA’s rebates for heat pumps, induction stoves, and electric water heaters. Those programs, some of which must be administered by state offices, have largely yet to be set up. (Even so — and in keeping with other encouraging trends — heat pump sales outpaced furnace sales in the U.S. for the first time last year.)
The Department of Energy is an agency transformed. The IRA held out the opportunity that the agency could metamorphose from an R&D-focused nuclear-weapons storehouse into the federal government’s dynamo of decarbonization. The Biden administration — and Energy Secretary Jennifer Granholm — has seized that opportunity.
As I wrote earlier this year, the agency has stepped into the role of being America’s bureau of industrial policy, replete with its own in-house bank. It has published some of the most detailed and sophisticated federal industrial plans that I’ve ever seen.
And it is getting admirably specific about each of the technologies in its portfolio. In a recent report on the nascent hydrogen industry, for instance, the department said that companies might not build out enough infrastructure because they can’t count on future demand for clean hydrogen. (It’s impossible for firms to invest in making hydrogen if they can’t be sure anyone is going to buy it.) Then, earlier this week, the agency announced a new $1 billion program to buy hydrogen itself, thus providing that demand-side certainty that producers need.
Let’s return to renewables. The United States is striving — but will likely fail — to build 30 gigawatts of offshore wind by 2030. It is building a couple dozen gigawatts of new solar capacity every year. That may seem like a lot: One gigawatt of electricity is enough to power about 825,000 homes.
But annual power demand in the United States is closer to 4,000 gigawatts — and it’s on track to grow as we electrify more and more of the economy. While decarbonizing the grid isn’t as simple as switching one energy source for another, still, it would take more than a century to build 4,000 gigawatts of renewables electricity at our current rate.
It’s a similar story in electric cars. The growth is good: EV sales rose 50% year over year in the first half of 2023. But the challenge is daunting: Electric vehicles made up only 7% of all new car sales in the U.S. during the same period, and decarbonizing the car fleet will eventually require making virtually all new car sales EVs, and then — over the next decade — replacing the 275 million private vehicles on the road.
And that’s the story of the IRA — from renewables to EVs, geothermal to nuclear energy. The trends have never been better. The government has never tried to change the energy system so quickly or so thoroughly. That, by itself, is progress: For decades, the great obstacle of climate change was that the government wasn’t trying to solve it at all.
But decarbonization will require replacing hundreds of millions of machines that exist in the world — and doing it fast enough that we avoid dealing catastrophic damage to the climate system. The IRA is about to take on that challenge head-on. Now we find out if it’s up to the task.
The real work, in other words, is just beginning.
Read more from Robinson Meyer:
The East Coast’s Smoke Could Last Until October
The Weird Reasons Behind the Atlantic Ocean’s Crazy Heat
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The energy sector — including oil and gas — and manufacturing took some heavy hits in the latest jobs report.
We got a much better sense of what the American labor market is doing today. And the news was not good.
The economy added only 22,000 jobs last month, far fewer than economists had predicted, according to a new release from the Bureau of Labor Statistics. The new data also shows that the economy gained slightly more jobs in July than we thought at the time, but that it actually lost 13,000 jobs in June — making that month the first since 2020 to see a true decline in U.S. employment.
The unemployment rate now stands at 4.3%, one tenth of a percent higher than it was last month. All in all, the American labor market has been frozen since President Trump declared “Liberation Day” and announced a bevy of new tariffs in April.
On the one hand, some aspects of that job loss shouldn’t be a surprise. As we’ve covered at Heatmap, the Trump administration has spent the past few months attacking the wind, solar, and electric vehicle industries. It has yanked subsidies from new electricity generation, rewritten rules on the fly, and waged an all-out regulatory war on offshore wind farms. Electricity costs are rising nationwide, constraining essentially all power-dependent industries except artificial intelligence.
In short: The news hasn’t been good for the transition industries. But what’s notable in this report is that the job declines are not limited to these green industries. The first eight months of Donald Trump’s presidency have been more and more damaging for the blue collar fields and heavy industries that he promised to help.
For instance: Mining, quarrying, and oil extraction lost 6,000 jobs in August. These losses were led by the oil and gas industry, as well as mining support companies. Other industries — such as coal mining firms — saw essentially no growth or very slightly declines.
More cuts are likely to come soon for the fossil fuel industry. The oil giant ConocoPhillips says it will lay off about a quarter of its roughly 13,000-person workforce before the year is out. The oilfield services company Halliburton has also been shedding workers in recent weeks, according to Reuters. The West Texas benchmark oil price has lost nearly $10 since the year began, and is now hovering around $62. That’s roughly the average breakeven price for drilling new wells in the Permian Basin.
The manufacturing industry has lost 78,000 jobs since the year began. In the past month, it shed jobs almost as fast as the federal government, which has deliberately culled its workforce, as the economic analyst Mike Konczal observed.
This manufacturing weakness is also showing up in corporate earnings. John Deere, the American farm equipment maker, has seen its income degrade through the year. It estimates that Trump’s steel and aluminum tariffs will cost the company $600 million in 2025, and it recently laid off several hundred workers in the Midwest.
Even industries that have previously shown some resilience — and that benefited from the AI boom — have started to stall out a bit. The utility industry lost about 1,000 jobs last month, on a seasonally adjusted basis, according to the new data. (At the same time, the number of non-managerial utility workers slightly increased.) The utility sector has still gained more than 6,000 jobs compared to a year ago.
A few months ago, I quipped that you could call President Trump “Degrowth Donald” because his tax and trade policies seemed intent on raising prices and killing the carbon-intensive sectors of the American economy. (Of course, Trump was doing plenty that radical climate activists didn’t want to see, too, and his anti-renewable campaign has only gotten worse.) Now we’re seeing the president’s anti-growth policies bear fruit. It was a joke then. Now it’s just sad.
Trump’s enthusiasm for the space has proved contagious — building on what Biden started.
It’s become a well-known adage in energy circles that “critical minerals are the new oil.” As the world pushes — haltingly but persistently — toward decarbonization and electrification, minerals such as lithium, nickel, and copper have only risen in their strategic importance.
These elements are geographically concentrated, largely in spots with weighty implications for geopolitics and national security — lithium largely in South America and Australia, copper in South America, nickel in Indonesia, cobalt in the Democratic Republic of the Congo, and graphite in China. They’re also subject to volatile price swings and dependent on vast infrastructure to get them out of the ground. But without them, there are no batteries, no magnets, no photovoltaic cells, no semiconductors, no electrical wiring. It is no surprise, then, that it’s already been a big year for investment.
Sector-wide data is scarce, but the announcements are plentiful. Some of the biggest wins so far this year include the AI minerals discovery company Kobold, which closed a colossal $537 million funding round, software-driven mining developer Mariana Minerals landing $85 million in investment, rare earth magnet startup Vulcan Minerals raising $65 million, and minerals recycling company Cyclic Materials announcing plans for a commercial plant in Canada.
“The good investments are still the good investments,” Joe Goodman, co-founder and managing partner at the firm VoLo Earth Ventures, told me. “But I think the return opportunities are larger now.” VoLo’s primary bets include Magrathea, which has an electrolysis-based process to produce pure magnesium from seawater and brines and is reportedly in discussions to form a $100 million partnership for a commercial-scale demonstration plant, as well as Nth Cycle, which recovers and refines critical minerals from sources such as industrial waste and low-grade ores and is well into its first full year of commercial operations.
Much of this activity has been catalyzed by the Trump administration’s enthusiasm for critical minerals. The president has issued executive orders aimed at increasing and expediting domestic minerals production in the name of national defense, and a few weeks ago, announced its intent to issue nearly $1 billion in funding aimed at scaling every stage of the critical minerals supply chain, from mining and processing to manufacturing. As Energy Secretary Chris Wright said at the time, “For too long, the United States has relied on foreign actors to supply and process the critical materials that are essential to modern life and our national security.”
Ironically, the Trump administration is building on a foundation laid by former President Biden as part of his administration’s efforts to decarbonize the economy and expedite the energy transition. In 2022, Biden invoked the Defense Production Act to give the federal government more leeway to support domestic extraction, refining, and recycling of minerals. It also invested billions of dollars from the previous year’s Bipartisan Infrastructure Law to secure a “Made In America supply chain for critical minerals.” These initiatives helped catalyze $120 billion in private sector investments, the administration said.
While they were “motivated by radically different ideologies,” Goodman told me, the message is the same: “We care a lot about our minerals.” As he put it, “The last two administrations could not have been better orchestrated to send that message to public markets.”
Ultimately, political motivations matter far less than cash. In that vein, many companies and venture capitalists are now aligning with the current administration’s priorities. As the venture firm Andreessen Horowitz noted in an article titled “It’s Time to Mine: Securing Critical Minerals,” an F-35 fighter jet requires 920 pounds of rare earth elements, a Navy missile destroyer needs 5,200 pounds, and a nuclear-powered submarine take a whopping 9,200 pounds. Rare earths — a group of metals that form a key subset of critical minerals — are crucial components of the high-performance magnets, precision electronics, and sensors these defense systems rely on.
The military is also certainly interested in energy storage systems, including novel battery chemistries with potential to be more efficient and cost effective than the status quo. This just so happens to be the realm of many a lucrative startup, from Form Energy’s iron-air batteries to Lyten’s bet on lithium-sulfur and Peak Energy’s sodium-ion chemistry.
The Army has also gone all in on microgrids, frequently building installations that rely on solar plus storage. And batteries for use in drones, cargo planes and tactical vehicles are often simply the most practical option, given that they can operate in near silence and reduce vulnerabilities associated with refueling. “It’s much easier to get electricity into contested logistics than it is to get hydrocarbons,” Duncan Turner, a general partner at the venture capital firm SOSV, told me.
Turner has overseen the firm’s investments in minerals companies across the supply chain, a number of which focus on the extraction or refining of just one or a few minerals. For example, SOSV’s portfolio company Still Bright is developing an electrochemical process to extract copper from both high-grade ores as well as mining waste, replacing traditional copper smelting methods. The minerals recycling company XEra Energy is initially focused on reclaiming nickel from ore concentrates and used batteries, though it plans to expand into other battery materials, as well, while the metal recycling company Biometallica is developing a process to recover palladium, platinum, and rhodium from e-waste.
These startups could theoretically use their tech to go after a whole host of minerals, but Turner explained that many find the most lucrative strategy is to fine tune their processes for certain minerals in particular. “That is just a telltale sign of maturity in the market,” he told me, as companies identify their sweet spot and carve out a profitable niche.
Clea Kolster, the head of science at Lowercarbon Capital, was bullish on the potential for critical minerals investments well before the Trump administration shifted the conversation toward their role in the defense sector. “Our view was always that demand for these minerals was just going to increase,” she told me. “This administration has certainly provided a boon and validator for our thesis, but these investments were made on the basis that these would render metal production cheaper and more accessible.”
Lowercarbon was an early investor in the well-capitalized startup Lilac Solutions, first backing the company’s pursuit of a more efficient and sustainable method of lithium brine extraction in early 2020. Since then, Lilac has raised hundreds of millions in additional funding rounds — which Lowercarbon has led — and is now seeking additional capital as it plans for its first commercial lithium production plant in Utah. Lilac isn’t the firm’s only lithium bet — it’s also backing Lithios, a company developing an electrochemical method for separating lithium from brines, and Novalith, which is working on a carbon-negative process for extracting lithium from hard rock without the use of environmentally damaging acids.
Kolster admitted that in Lowercarbon’s early days, the firm “didn’t fully appreciate how significant those additional narratives would become beyond decarbonization,” pointing to critical minerals’ newly prominent role not just in defense, but also in the AI arms race. After all, no new transmission lines, transformers, gear to turn circuits on and off, or other critical grid components can be built or scaled to support the rising electricity demands of data centers without critical minerals.
Goodman told me that some generalist investors have yet to take note of this, however. “There’s large pockets of the investment community who feel like climate is out of the rotation,” he said.
“So in a way we’re experiencing a better pricing opportunity right now, access to higher quality deals.”
From here on out, he predicts we’ll see a steady stream of announcements signaling that the U.S. has secured yet another link in the minerals supply chain, which will be crucial to counter China’s global influence. “I think annually you’ll be seeing the US raise the flag and declare success on another mineral,” Goodman told me. “It might be two years after we raise the flag that a facility is actually operational. But there's going to be a cadence to us taking back our supply chain.”
On a Justice Department crackdown, net zero’s costs, and Democrats’ nuclear fears
Current conditions: Hurricane Lorena, a Category 1 storm, is threatening Mexico and the Southwestern U.S. with flooding and 80 mile-per-hour winds • In the Pacific, Hurricane Kiko strengthened to a Category 4 storm as it heads toward Hawaii • South Africa’s Northern Cape is facing extremely high fire risks.
The owners of Revolution Wind are fighting back against the stop-work order from President Donald Trump that halted construction on the offshore wind project off the coast of Rhode Island last month. On Thursday, Orsted and Skyborn Renewables filed a complaint in the U.S. District Court for the District of Columbia, accusing the Trump administration of causing “substantial harm” to a legally permitted project that was 80% complete. The litigation claimed that the Department of the Interior’s Bureau of Ocean Energy Management “lacked legal authority for the stop-work order and that the stop-work order’s stated basis violated applicable law.”
“Revolution Wind secured all required federal and state permits in 2023, following reviews that began more than nine years ago,” the companies said in a press release. “Revolution Wind has spent and committed billions of dollars in reliance upon this fulsome review process.” The states of Rhode Island and Connecticut filed a similar complaint on Thursday in the U.S. District Court for the District of Rhode Island, seeking to “restore the rule of law, protect their energy and economic interests, and ensure that the federal government honors its commitments.” Analysts didn’t expect the order to hold, as Heatmap’s Matthew Zeitlin reported last month, though the cost to the project’s owners was likely to rise. As I have reported repeatedly in this newsletter over the past few weeks, the Trump administration is enlisting at least half a dozen agencies in a widening attack meant to eliminate a generating technology that is rapidly growing overseas.
After the cleanup in Altadena, California.Mario Tama/Getty Images
The Department of Justice sued South California Edison on Thursday for $77 million in damages, accusing the utility of negligence that caused two deadly wildfires. Federal prosecutors in California alleged the utility failed to maintain infrastructure that ultimately sparked the Eaton fire in January, and the 2022 Fairview fire in Riverside County, The Wall Street Journal reported. The fires collectively killed about two dozen people and charred more than 42,000 acres of land. “Hardworking Californians should not pick up the tab for Edison’s negligence,” said Bill Essayli, the acting U.S. Attorney for California’s Central District, where the lawsuit was filed.
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It sure sounds like a lot of money. In a new research note released this week, the energy consultancy BloombergNEF calculated the total cost to transition the global economy off unmitigated fossil fuels by 2050 at $304 trillion. But that’s only 9% above the cost of continuing to develop worldwide energy systems on economics alone, which would result in 2.6 degrees Celsius of global warming. That margin is relatively narrow because the operating costs of cleaner technologies such as electric vehicles and renewable power generators are lower than the cost of fuel in the long term. The calculation also doesn’t account for the savings from avoided climate disasters in a net-zero scenario that halts the planet’s temperature spike at 1.7 degrees Celsius. While the cost of investing in renewables, grid infrastructure, electric vehicles, and carbon capture technology would add $45 trillion in additional investment, it’s ultimately offset by $19 trillion in annual savings from making the switch.
Microsoft has signed a series of deals that tighten the tech giant’s grip on the nascent carbon removal market. With new agreements that involve direct air capture in North American and burning garbage for energy in Oslo, Microsoft now accounts for 80% of all credits ever purchased from tech-based carbon removal projects. The company made up 92% of purchases in the first half of this year, the Financial Times reported, citing the data provider AlliedOffsets. By comparison, Amazon made up 0.7% of the market and Google comprised 1.4%.
We are still far from where carbon removal needs to be to make an impact on emissions. All the Paris Agreement-consistent scenarios modeled in the scientific literature require removing between 4 billion and 6 billion metric tons of carbon per year by 2035, and between 6 billion and 10 billion metric tons by 2050, as Heatmap’s Emily Pontecorvo wrote recently. “For context, they estimate that the world currently removes about 2 billion metric tons of carbon per year over and above what the Earth would naturally absorb without human interference.”
At a hearing before the Senate Environment and Public Works Committee, the two Democrats left on the Nuclear Regulatory Commission told Congress they feared Trump would fire them if they raised safety concerns about new reactors. Matthew Marzano said the “NRC would not license a reactor” that didn’t pass safety standards, but that it’s a “possibility” the White House would oust him for withholding approval. “I think on any given day, I could be fired by the administration for reasons unknown,” Crowell told lawmakers, according to a write-up of the hearing in E&E News.
Hitachi Energy announced more than $1 billion in investments to expand manufacturing of electrical grid infrastructure in the U.S. That includes about $457 million for a new large power transformer facility in Virginia. “Power transformers are a linchpin technology for a robust and reliable electric grid and winning the AI race,” Andreas Schierenbeck, chief executive of Hitachi Energy, said in a press release. “Bringing production of large power transformers to the U.S. is critical to building a strong domestic supply chain for the U.S. economy and reducing production bottlenecks, which is essential as demand for these transformers across the economy is surging.”