May 11 - A shortage of transformers is holding back the deployment of U.S. power infrastructure as surging demand from power developers and data centers outstrips supply.
Power transformers are a core component of substations that sit between power generation, grid systems and local consumer networks, stepping up or stepping down voltage levels for safe and efficient transmission.
New data centers, factories, electric vehicles and renewable energy projects, combined with grid modernisation, are driving up demand. U.S. demand for generator step-up (GSU) transformers hiked by 274% between 2019 and 2025 and demand for substation power transformers rose by 116%, according to Wood Mackenzie.
Manufacturers are expanding U.S. transformer production but demand is expected to exceed supply for some time.
Transformer prices have risen by about 80% over the last five years, inflating project costs, and lead times have increased substantially, Michael Novev, Senior Associate Technical Consultant at engineering, procurement and construction (EPC) firm Burns & McDonnell, told Reuters Events.
A high volume of grid applications combined with the constrained supply of transformers and other equipment are delaying crucial expansions to power grids. Some data center developers are procuring transformers for on-site power generation to avoid long wait times for grid connections.
Queues for transformers are stretching up to four years for some high-capacity units, Daryl Walcroft, PwC U.S. Capital Projects & Infrastructure Leader, said.
The transformer shortage is “a major constraint on U.S. grid expansion,” Walcroft said.
Imports crucial
Long lead times for transformers can extend project timelines and lead to out of sequence construction, resulting in lost or deferred revenue and increasing financing costs, Brandon Logan, Section Manager, Construction Procurement at Burns & McDonnell, said.
Developers can also face challenges in finding and training qualified personnel and long lead times can require project partners to retain highly skilled labour for longer.
Many U.S. power developers are depending on imported transformers and supply has tightened on the back of rising global demand and constrained supplies of key inputs such as copper and grain-oriented electrical steel, Walcroft said.
Surging U.S. demand is bringing more foreign transmission suppliers into the market. In March 2026, Turkey’s Astor Enerji said that it had secured contracts with four U.S. companies to ship $769 million worth of power transformers between 2026 and 2028. South Korea’s LS Electric announced a $312 million contract with a U.S. utility in November 2025 to supply 525 kV extra-high-voltage transformers to a new large-scale data centre in southeastern U.S. between 2027 and 2029.
Long lead times for transformers typically dictate the overall project schedule of grid projects, Novev said.
Developers are often willing to pay significant premiums or buy production slots well in advance, sometimes without a specific project, Novev said.
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Developers must secure transformers early in development or they "run the risk of creating stranded assets, such as having transmission lines completed but sitting idle while waiting on transformers," Walcroft said.
Materials management is becoming a more shared responsibility across developers, suppliers and EPCs throughout the project lifecycle, he said.
Some developers are also refurbishing older transformers to bridge the service gap until new units arrive, he added.
US factories
As transformer demand surges, major grid equipment makers are ramping up U.S. capacity.
Hitachi Energy has announced more than $1 billion investment, including $457 million in a new large transformer facility in south Boston due online in 2028 and $106 million in a transformer component plant in Alamo, Tennessee due for completion by mid-2027. The global technology supplier forecasts U.S. demand for grid infrastructure will increase for at least the next decade.
In February, Siemens announced it would increase spending on manufacturing facilities in North Carolina from $150 million to $421 million. This includes a new transformer factory in Charlotte due online this year.
GE, Hyosung HICO and WEG are also investing in transformer manufacturing.
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Long-term agreements and the sale of future production slots are providing manufacturers with the "financial certainty needed to invest in facility expansions," noted Logan.
However, a U.S. supply gap is likely to remain and developers still face challenges in finding and training qualified personnel, Novev said.
“It is unlikely that the current manufacturing capacity expansions will fully alleviate the [U.S.] supply-demand imbalance within the next five years," he said. "Primarily because demand shows no signs of slowing down."
--Editing by Robin Sayles
