Comment by mikeyouse
4 months ago
This would be a great opportunity for the government to get involved.. Tell them to just make two of every order they have now and the government will buy the second one at whatever price the customer is paying. Put the spares in a strategic repository and sell them at “cost” to whoever wants them. Would be a much better use of a few billion dollars than some asinine Star Wars II or another half a trillion into the war maw.
The head of Newport News Shipbuilding and Dry Dock, which builds the US aircraft carriers, once ran a full page ad announcing that if Congress would order two carriers at once, instead of one at a time, they'd throw in a third carrier for free. The total shutdown between jobs was that expensive for them.
That reminds me of the restaurant using its liquidity to prepay its dry aged steak supplier.
https://commoncog.com/cash-flow-games/#3-pre-payments-in-the...
Liquidity is expensive. Selling a carrier one at a time is like a retail business where you're expected to hold onto stock. If you don't build up an inventory to sell from and just sell one unit, you have to markup the price to cover the cost of the factory when it is idle.
It’s a major cause of why the U.S. shipbuilding industry can produce such a tiny number of surface combatants per year, despite having the industrial capacity to do far more if it was steady work.
The US Government selling off the helium reserve at cost over two decades effectively capped the global price, even while exploration costs got higher. So exploration was killed, no investments made in better extraction, processing or recycling.
Now that it's gone we're ultra dependent on a by-product of methane extraction and liquification for LNG transport. But most of the helium we extract as natural gas is not separated, as it just gets piped as gas. Helium is getting very very expensive.
You can have the government buy the equipment with the economy goes down, or you can have the government manufacturing it and letting the factory go idle when demand dries down.
But amplifying the orders just makes the problem worse.
> Put the spares in a strategic repository and sell them at “cost” to whoever wants them.
That means that eventually the factory goes idle, when all the demand is serviced by the spares.
Have the government only sell these in times of crisis. They're not competitors, but vendors of last resort. For general maintenance replacement, the gov should tell prospective buyers to take a hike.
The Biden administration invoked the Defense Production Act and used $250m of IRA funds to increase production of grid transformers. Guess what happened when Trump took office.
It got reversed because executive action is a stupid way to make policy?
Yah it was an extremely foolish and short sighted EO by Trump, and the country will pay for it for a long time.
This reads like you just desperately wanted to criticize, but couldn't really be troubled to research the background for a minute or two.
The IRA was a law passed by Congress. It set aside funds for grid upgrades, but did give some latitude to the President to deal with crises, because it was understood that Congress couldn't move quickly enough to deal with sudden supply issues. One thing that happened was the investments into grid upgrades created a demand shock, and transformer pricing and timelines surged upwards. So at that point the President invoked the DPA and used a chunk of IRA funding to try to unsnarl the transformer pipeline so the rest of the project could proceed. Then Trump (for basically arbitrary reasons) decided to screw it up. (He's also screwed it up in ways that probably just plain violate the law, but he doesn't care about that either -- which is why "run policy purely from the Legislative branch" doesn't fix any of this.)
Given the context -- a broad law duly passed by the slower legislative branch, a crisis dealt with (according to the law) by the more nimble Executive branch -- I am struggling to make your criticism sound reasonable, even with the absolute maximal dose of charity. This is basically the kind of governance that we want a functioning Legislative and Executive branch to engage in; it was screwed up on purpose; and your proposed solution/excuse does not produce better outcomes.
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> This would be a great opportunity for the government to get involved
They have been:
https://www.energy.gov/oe/transformer-resilience-and-advance...
I'm not sure that this helps.
The problem expressed, I think, that it is not useful to scale up production quickly (or perhaps at all), because a factory catching up on all of their orders means that the factory goes idle. Idle factories can't afford to pay wages, so they lay off some or all of the workers -- and those folks go and find different jobs.
And when they leave, they take their institutional knowledge with them.
So the sustainable goal is to never be idle, and the way to accomplish this is to never catch up.
For an example of how idle factories can go sideways, look at the Polaroid film story: Polaroid closed. Everyone left. Some investors with a big dream eventually bought many of the physical assets that remained.
But owning some manufacturing equipment didn't help them much because the institutional knowledge of producing Polaroid film had already evaporated. They had to largely re-invent the process. (And they've done a great job of that, but it's still not the same film as the OG Polaroid was.)
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So anyway, suppose the government steps in and simply artificially multiplies transformer orders x2, and pays them fairly for this doubled production. Since transformers are tangible things and we can't just spin up more AWS instances to cover demand, the immediate result is that the "short" lead time on new orders has increased from 2 years, to 4.
That's not seeming to be very ideal. It seems to amplify the problem instead of resolve it.
I suppose that the government could also offer safeguards that would help protect the businesses (including suppliers for parts) once they eventually catch up on orders, and that this might motivate them to scale production sooner instead of later (or never).
Which -- you know -- that isn't unprecedented. As an example: The Lima Army Tank Plant, in Lima, Ohio, is place where I've spent a fair bit of quality time. It still exists and continuously has employees largely because the institutional knowledge of how to build tanks (and a few other war machines) is considered to be too important to lose. During lulls, it mostly just sits there on its expansive site, loafing along repairing stuff that comes in, and waiting for the day when things to turn bad enough that we need to start increasing our number of tanks again.
It needs to keep operating (at any expense), and so with the magic of the government money-printing machine: It does. But it's one of the most actively depressing industrial sites I've ever been to; like the life just gets sucked right out of you before even getting past the entrance gate.
We can certainly extend that kind of thing to transformer production. But should we?
Depends if we intend to reboot after a major geomagnetic event or a war that destroys electrical infrastructure.
Sure.
I mean: I've got some MREs in the pantry along with some other shelf-stable food, and I've got some water stored (primarily to fill empty space in the chest freezer for various practical reasons, but it exists). I keep some basic first aid and survival stuff in the car (bandages, space blankets, stuff to catch fish with, stuff to cook with). I've got my camping gear, including a small off-grid solar power system, stored in organized totes that can be loaded up very quickly. And I try to keep a minimum of a couple hundred miles worth of fuel in the gas tank at all times.
I do these things just in case. The bulkiest items see frequent use. None of this cost me very much to buy, or to maintain. And none of these things can replace the lifestyle I've come to expect, but they might be able to buy me some time.
Can we afford to have a spare copy of the hard-to-produce parts of the electrical grid sitting in a warehouse?
Would we even want to rebuild the grid in the same shape if the shit really hit the fan and we had to start it over from scratch?
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Lead times increasing to four years doesn't necessarily mean that every order will take that long. Since the additional orders are just there to cover idle periods, the government could omit an expected delivery time so regular orders don't get delayed.
I think that would mean that the factory would switch from operating at 100% capacity (and never catching up), to 100% capacity (and never catching up).
For that kind of sameness, it seems like it'd be easier to do nothing at all.
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