Finalized energy mandate gives more time to Cleveland-Cliffs
The U.S. Department of Energy’s final energy standards, released Thursday, April 4, indicate Cleveland-Cliffs Butler Works will have five years instead of three years to comply with new efficiency standards.
The announcement to increase the minimum efficiency by 2029 comes after Cleveland-Cliffs management, union leaders and elected officials opposed the proposed mandate, raising concerns that the jump in energy efficiency requirements was too wide for the company to bridge in just under three years and would potentially risk 1,300 jobs at the Butler Township plant.
The new standards for manufacturers of distribution transformers outpace the efficiency of grain-oriented electrical steel, manufactured domestically only at Cleveland-Cliffs Butler Works. However, Jennifer Granholm, U.S. Secretary of Energy, said the new compliance period gives the company time to improve its product’s efficiency.
“In that time, transformer manufacturers can maintain their existing production capacity and choose how best to update their facilities and designs to meet customer needs,” Granholm said Wednesday.
Jamie Sychak, president of United Auto Workers Local 3303, who has raised awareness about the DOE’s proposed rule in hopes of changing it since it was announced in January 2023, called the alterations to the mandates a win for the UAW Local 3303 and the Butler County community following the release of the final rule Thursday morning.
“The DOE’s final rule ensures a viable pathway for UAW-made steel to supply the transformer market long into the future,” Sychak said.
Sychak previously said the mandate could put the Butler Works plant out of business, because of the increase in efficiency standard.
Lourenco Goncalves, Cleveland-Cliffs’ chairman, president and chief executive officer, said the company is grateful that the Department of Energy was open to feedback and amended the finalized rule.
“The final rule ensures Cliffs’ ability to continue producing highly-efficient (grain-oriented electrical steel) in the United States,” Goncalves said. “Once this rule is enacted, we expect to actually see an increase in demand for our GOES, opening the possibility of future investments and expansion of our plants in Butler, Pa., and Zanesville, Ohio.”
The department’s decision to implement the standards in 2029 instead of 2027 was in response to stakeholder feedback, Granholm said.
Granholm also pointed to how the Butler Works plant is up for a $75 million grant from the Department of Energy, which she said also will help the company up its efficiency to the new standards.
“One of the entities that received a $75 million grant is that Butler plant, for installing an electric arc furnace to make E-steel,” Granholm said. “Cleveland-Cliffs is benefiting from some other programs as well, so we can create an American steel industry that is producing efficient steel.”
The specialty steel, also known as electrical or E-steel, is used in distribution transformers to convert high-voltage electricity from power plants to levels that are safe enough for homes, and the initial proposal from the DOE leaned into using amorphous steel rather than grain-oriented cores.
According to Granholm, the final standard will be met with roughly 75% of grain-oriented electrical steel in distribution transformers, and the other 25% will be attainable by amorphous cores.
The magnetic core of amorphous metal transformers is made by rapidly cooling special alloys, a process different from the production of grain-oriented electrical steel.
Amorphous steel is produced domestically only by Metglas in Conway, S.C.
Prior to the Thursday announcement, the union’s efforts to alter the proposed mandate caught the attention of elected leaders, including U.S. Rep. Mike Kelly, R-16th, and Gov. Josh Shapiro, leading to a bipartisan push to change the proposal.
Most recently, Kelly hosted a town hall Monday where he, Sychak and plant management spoke about how grain-oriented electrical steel is produced, and how the proposed rule could shutter the Butler Works plant, leading the nation to rely on international producers of transformer cores.
In January, Kelly and seven congressional co-sponsors introduced the bipartisan Distribution Transformer Efficiency & Supply Chain Reliability Act of 2024. The bill, which is still in the introduction stage, would limit the implementation of new transformer efficiency rules by the Department of Energy.
Aaron Steinheiser, general manager of the Butler Works and Zanesville, Ohio, plants, said at the town hall that the steel the company produces is more than 99% efficient, and more efficient than amorphous metal when running at high capacities. He also said Cleveland-Cliffs has improved the efficiency of its steel in the past, but bumping it up to the levels the DOE proposed would likely take more than three years.
Steinheiser directed the Butler Eagle to contact the corporate office for comment. The Eagle did not immediately hear back.
Granholm said the Energy Policy and Conservation Act required the Department of Energy to look at amended standards for distribution transformers every six years, which led to a federal court order that the department review standards by June. She also said the final rule will save Americans more than $14 billion in energy costs over 30 years. The new rule will save domestic utility and commercial industrial entities $824 million per year in electricity costs; and slash upward of 85 million metric tons of carbon dioxide pollution.
Transformer installations are projected to triple by 2050, according to Granholm, so the department is committing to continued creation of grain-oriented steel and added incentives for domestic companies to manufacture amorphous steel to meet that need.
“One of the strategies we have in the department is to make sure that we are filling in gaps in the supply chain and helping industry to evolve,” Granholm said. “This is a huge market certainty opportunity for Cleveland-Cliffs. I was at Cleveland-Cliffs in Ohio last week; I think they're very happy with the outcome of this rule.”
