The US is grappling with a critical shortage of power transformers, the vital components that facilitate the reliable transmission of electricity across the nation. In response to this growing crisis, the President’s National Infrastructure Advisory Council (NIAC) released a report in June 2024 underscoring the immediate need to strengthen the transformer supply chain. The shortage has worsened by the lingering effects of the COVID-19 pandemic, leading to prolonged lead times for transformer production, with new orders for large models now extending up to 210 weeks—a significant increase from the 50-week turnaround seen in 2021. This dramatic delay results from a combination of factors: persistent supply chain disruptions, an outdated grid infrastructure, and increasing demand driven by widespread electrification and the integration of renewable energy sources (RES).
According to the NIAC report, the pressure on the transformer industry is intensifying as the nation transitions to a more electrified and sustainable energy landscape. The demand for transformers is expected to increase by as much as 280 per cent by 2050, spurred by the need to support RES generation and the substantial increase in electricity consumption from data centers, electric vehicles (EVs), and other high-demand uses. Adding to this urgency, a large portion of transformers in the US are reaching the end of their operational lifespan, necessitating replacements to prevent any interruptions. Just the need for replacements is already putting pressure on the limited supply, causing higher transformer prices that will affect both utility companies and consumers in the future.
The report identifies several underlying challenges that contribute to this persistent shortage. Foremost among them is the heavy reliance on international sources for large transformers and the specialised materials required in their production, particularly grain-oriented electrical steel (GOES). Presently, just 20 per cent of big power transformers are made in the country, making it exposed to global supply chain interruptions which bring about national security concerns. In addition, the manufacturing sector faces labour shortages, particularly in rural areas where transformer plants are often located, along with a lack of standardisation in transformer design, both of which hinder production scalability and efficiency.
NIAC makes seven strategic recommendations to tackle these intricate problems. One of the main priorities is the expansion of domestic manufacturing capacity through federal incentives modelled on the successful Crafting Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act of 2022. By providing tax credits, grants, and funding for workforce development, the government can boost the production capabilities and reduce dependence on foreign suppliers. The report also recommends creating a strategic national reserve of transformers, in order to act as a backup during shortages and reduce risks to grid stability.
Standardisation is identified as a crucial focus to enhance manufacturing efficiency and reduce production costs. NIAC calls on the federal government to foster collaboration between utilities, manufacturers, and industry associations to develop standardised transformer designs. This method could allow for increased production volume, reduce time to market, and less dependence on specialized parts that complicate manufacturing. Furthermore, the report suggests enacting synchronized federal policies to ensure a consistent and strong supply of electrical steel by backing domestic and nearshore production. The labour shortage within the transformer manufacturing sector also requires immediate attention. NIAC recommends establishing collaborations with universities, vocational schools, and community colleges to develop a talent pool of trained employees as well as providing tax breaks and financial support to draw workers to the sector.
By implementing these recommendations, NIAC envisions a pathway toward mitigating the transformer shortage, improving grid reliability, and building a resilient infrastructure capable of supporting the nation’s expanding electrification needs. By doing so, the US can better prepare for the demands of a modernised, sustainable energy future and reduce the risks associated with over-reliance on external sources for critical infrastructure.
The full report can be accessed here
