Courtesy US DOE
Pressure on power infrastructure in the US is intensifying, with a supply shortage for power and distribution transformers to hit 30% and 10%, respectively, in 2025, according to a recent report from Wood Mackenzie, an energy research and consultancy firm.
According to the report ‘Untangling the US transformer supply chain crisis‘, since 2019, Wood Mackenzie estimates that US power and distribution transformers have seen demand surge by 116% and 41%, respectively. This has been due to a confluence of new demand drivers, including a rise in electricity consumption, which has increased 7% since 2020, reversing a 1% decline from 2010 to 2020, the growing pipeline for clean energy projects, and aging infrastructure, Wood Mackenzie notes.
“This surging transformer demand has created a significant supply deficit, with domestic manufacturing capacity unable to keep pace,” observed Ben Boucher, senior analyst of supply chain data and analytics at Wood Mackenzie.
“Utilities are routinely turning to the import market to meet project timelines. In 2025, imports will account for an estimated 80% of US power transformer supply and 50% of the distribution transformer supply. This market imbalance is escalating costs and lead times and is delaying our ability to bring generating plants online in pace with the surging energy demand.”
Supply has not kept pace with demand, resulting in a growing market deficit across all transformer specifications and escalating lead times and prices, the report found.
Have you read:
Can solid state transformers be the next evolution for power grids?
AI in the energy sector – growing energy demand but potential to transform it
The tariff effect
According to the report, policy shifts further complicate transformer supply chains, as the evolving trade landscape in the US will “exacerbate recent price increases” for transformers.
“The passage of Trump’s ‘One Big Beautiful Bill’ (OBBBA) will change the demand outlook for step-up transformers due to cuts in clean energy support,” said Boucher. “Transformer costs are expected to increase due to new tariffs, as both imported and domestically produced units will be subject to higher unit costs due to the wide array of new tariffs, with more, including 50% on copper, set to come into effect in August, further intensifying the cost increases.”
What’s on the horizon?
To meet demand, many of the largest original equipment manufacturers (OEMs) have announced investments into capacity expansions totalling $1.8 billion since 2023, specifically targeting the North American market. While this could alleviate some pressure, the demand growth rate will necessitate further expenditure to rebalance the market, according to the report.
“The US transformer market stands at a critical juncture, with supply constraints threatening to undermine the nation’s energy transition and grid reliability goals,” said Boucher. “The convergence of accelerating electricity demand, ageing infrastructure, and supply chain vulnerabilities has created constraints that will persist well into the 2030s.”
Boucher continued, “The path forward requires coordinated action across multiple fronts. Utilities must embrace standardisation to unlock manufacturing efficiencies, while policymakers need to balance trade protection with supply security. Investment in workforce development and raw material supply chains will prove equally critical. Without decisive intervention, extended lead times and elevated costs will become the new normal, potentially derailing grid modernisation efforts and clean energy deployment.”
A ‘critical’ shortage
The US is in the middle of an unprecedented imbalance between supply and demand for power transformers, which has left the energy sector anxious and uncertain about the stability of the future grid. Earlier this year, the National Renewable Energy Laboratory (NREL) completed the first phase of a study that quantified the number, capacity, age, and use of the nation’s current transformer stock — something it says has never been done before.
Based on the transformer data collected, NREL estimates that distribution transformer supply may need to increase 160%–260% by 2050 compared to 2021 levels to meet residential, commercial, industrial, and transportation energy demands. NREL says the demand increase is largely driven by aging transformers and electrification. NREL is also examining potential demand increases from extreme weather events and utility undergrounding and resilience programmes that use various types of transformers.
Another recent report from the National Infrastructure Advisory Council (NIAC) examined the current state of the power transformer shortage in the US and made several recommendations for how to potentially overcome the obstacle.
Addressing the Critical Shortage of Power Transformers to Ensure Reliability of the US Grid notes that the transformer manufacturing industry experienced “severe” supply chain issues during the COVID-19 pandemic, and the impacts of those disruptions are becoming amplified. An electric utility or generator may have to wait between 2 to 4 years for a new transformer to be delivered, compared to a few months as recently as 2020. In an extreme case, one large power transformer manufacturing facility in the US revealed a 5-year wait time for new transformer orders.
The rising demand for transformers is driven by increasing electrification around the world, growing renewable energy generation, and growth in large-load customers like data centres, the report said. This has also led to sharp price increases that could have a ripple effect on electricity costs for business and residential customers.
In addition to increasing demand, the domestic transformer manufacturing industry has had trouble attracting and retaining qualified workers, NIAC noted in the report. Additionally, automation, assembly optimisation initiatives, and other mass production technologies have not made transformer production much more efficient, as there is a lack of standardisation in transformer design.
Originally published by Sean Wolfe on Factor This.
