American Think Tank Laments: Severe Shortage of Transformers in the U.S.

National Interest: The Missing Link in America’s Grid – Transformers

It’s not just red tape that’s limiting U.S. power supply. The grid is a physical machine, and transformers are critically short.

The importance of electricity to America’s future has never been greater. The country’s largest corporations are making massive capital investments in data centers and AI chips. The White House supports these efforts and aims to “achieve global leadership” in this technology. Yet, as data centers now account for 7% of U.S. electricity demand and continue to grow, consumers are increasingly worried about rising electricity prices—power supply could become a bottleneck. It’s not just AI: ample electricity is also essential for bringing manufacturing back domestically and installing more efficient, environmentally friendly energy technologies such as heat pumps.

Growing electricity demand requires a robust grid, and every grid needs transformers. Transformers are devices that change the voltage of electric current. Power plants—such as gas-fired or nuclear facilities—produce medium-voltage electricity; large transformers step up the voltage to high levels for efficient long-distance transmission to end users. Later, smaller distribution transformers must step down the current again to safe levels for use in appliances like refrigerators. Without these transformers—containers housing steel cores, copper windings, and (usually) mineral oil for cooling—the power system simply cannot function.

Yet in recent years, Americans have struggled to obtain these transformers. From 2019 to 2025, demand for power transformers has surged by 116%, with developers complaining they must wait over two years to receive one. Utility companies and construction firms report that power shortages are slowing their work and stalling some projects. Now, creators of the White House’s AI Action Plan fear the U.S. may not be able to “build a grid that keeps pace with the speed of AI innovation.”

The Overburdened Grid: Demand, Aging Infrastructure, and Extreme Weather

Several factors have collectively overwhelmed this supply chain.

First, electricity demand is growing again, at an annual rate close to 2%, increasing pressure on both generation (e.g., collecting and transmitting power from solar farms) and distribution (delivering power to homes and factories).

Second, the U.S. grid itself is aging. The Department of Energy (DOE) warns that over half of distribution transformers have already been in service for more than 33 years—approaching their useful life.

Finally, extreme weather damages transformers: in 2024, Hurricane Helene destroyed transformers at 360 substations in North Carolina, forcing utilities to scour an already strained market for replacements.

To some extent, high transformer prices have spurred new production facilities. Since 2023, companies have announced nearly $2 billion in investments in transformer manufacturing across North America, including Hitachi’s $457 million mega-factory in Virginia. By 2030, most types of transformers are expected to see reduced shortages—but industry insiders warn that large power transformers will likely remain problematic. Even if supply chain issues ease, a widespread challenge facing U.S. electrification remains a shortage of sufficiently trained labor—these new factories are all competing for the same small pool of skilled workers.

Vulnerable Transformer Supply Chain

Moreover, some problems cannot be solved solely by the market. Most transformer cores are made from oriented electrical steel—but as Megan Husted and Alice Wu point out in *The National Interest*, only one company in the U.S. produces this material. This leaves American manufacturers dependent on imports for about 80% of their transformers, such as those from Japan or South Korea. For policymakers focused on reshoring and resilience, this is a political issue; for businesses affected by U.S. tariffs, it’s an economic one.

Transformers are custom products: there are estimated to be 80,000 different models currently in use. This lack of standardization makes it difficult for the Department of Energy (DOE) to address shortages through measures like reserves or virtual stockpiles—what transformers should be prioritized?

The government should focus its efforts on large power transformers, which can take months to manufacture and may even be as large as a garage—not spread attention across countless small transformers scattered across various substations nationwide.

The DOE’s Grid Deployment Office can play a role through grants, but the funding required far exceeds the $375 million allocated under the “Small Grants Act” passed in January 2026. Congress, meanwhile, focuses more on tax policy. As proposed in the bipartisan “Circulate Act,” manufacturers could receive tax credits—but industry leaders say that increasing workforce capacity may matter more than general financial support for production.

An Opportunity for Bipartisan Cooperation to Solve America’s Grid Bottleneck

Free from the political debates around coal or solar, the breakdown in the transformer supply chain should be an area where Democrats and Republicans can work together. Should the U.S. rush to procure transformers to connect new projects to the grid—or strike a balance between speed and domestic production of key components, or supporting next-generation technologies like solid-state transformers?

The right solution depends on how one views the desired outcome. The good news is that policymakers are increasingly recognizing that fixing the U.S. grid requires more than regulatory fixes to improve intangible interconnection queues and permitting processes. The grid is a physical machine missing critical parts—resolving the transformer shortage could make a real difference.

Authors: Noah Gordon and Sia Ver

Original: toutiao.com/article/1859851682154496/

Disclaimer: The views expressed in this article are those of the authors alone.