The purchase of transformers is a decisive factor in whether a project can be completed on time.
Image: Magnolia 677/Wikimedia Commons
The battle for electrical infrastructure is reaching a fever pitch as energy developers and data center operators compete for limited factory production sites. A report from Reuters Events highlights that long transformer lead times are now determining the planning of energy projects across the country.
According to PwC analysts, a combination of rising demand and raw material shortages has pushed lead times for high-capacity units to up to four years. This shortage is quickly becoming the main bottleneck for the modernization of the electricity grid and the deployment of renewable energy.
Data from Wood Mackenzie shows that demand for step-up transformers for generators increased by 274% between 2019 and 2025. During the same period, demand for substation transformers increased by 116%. The growth is fueled by a massive influx of new cargo from artificial intelligence data centers and the ongoing transition to electrified transportation and industrial production.
Industry experts note that prices for these essential components have increased by approximately 80% over the past five years. Michael Novev of Burns and McDonnell told Reuters Events that price inflation combined with extreme delivery delays is forcing developers to change their sourcing strategies. Some companies are now purchasing manufacturing sites at a premium before even completing a specific project site. Others resort to refurbishing older equipment to bridge the gap until new units arrive.
A major factor in the supply shortage is the limited availability of grain-oriented electrical steel and copper. Specialized steel is needed for transformer cores and faces its own global supply chain hurdles. Because domestic production of materials is limited, manufacturers and developers remain heavily dependent on imports to cover the shortage.
In response to the domestic supply gap, manufacturers are increasing investments in U.S. manufacturing facilities. Hitachi Energy recently announced an investment of more than $1 billion, including a new factory in South Boston expected to be operational in 2028. Siemens also increased its manufacturing commitments in North Carolina to $421 million for a transformer plant in Charlotte.
Despite these investments, the imbalance between supply and demand is expected to persist for years to come. Large-scale data center developers are increasingly looking at it on-site energy generation to bypass the long queues for grid connections, while utility-scale renewable projects risk becoming stranded assets if they cannot secure the transformers in time for project completion.
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