U.S. power grid equipment shortages worsen as transformer delivery times hit record highs

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The United States' electric power infrastructure is facing a structural bottleneck crisis. Transformer delivery lead-times have soared to record highs and prices have risen sharply, further compounded by the high concentration of raw material supply. This is fundamentally reshaping the pace of U.S. industrial expansion and AI infrastructure construction.

According to Wood Mackenzie’s survey for Q2 2025, the average delivery lead-time for standard power transformers has reached 128 weeks, about two and a half years; generator step-up transformers have an even longer average lead-time of 144 weeks, with some special orders extending up to four years. In contrast, before the pandemic, the normal lead-time for such equipment was only 12 to 16 weeks.

Morgan Stanley’s Chief Fixed Income Strategist Vishwanath Tirupattur pointed out in a recent research report that power supply constraints are “not a peripheral friction, but the core of all AI infrastructure construction.” This is not a slight delay but an escalation from several months to over two years. For AI data centers, transformers are not optional components. Without these devices, the generated power cannot be effectively connected or used, and data centers cannot deliver computing power as planned.

The direct impact of this situation on the market is already evident: equipment availability has replaced capital and permitting as the primary limiting factor for advancing industrial projects. For AI data center developers, industrial electrification projects, and grid modernization plans, transformer procurement planning must be initiated before project financial approval; otherwise, they will face an additional construction delay of two to four years.

Lead-times and Prices Both Reach Record Highs

Data from the North American Electric Reliability Corporation (NERC) shows transformer delivery lead-times surpassed 120 weeks in 2024 and continue on an upward trend in 2025. Wood Mackenzie’s latest survey further confirms that the average lead-time for standard power transformers is 128 weeks, and for generator step-up transformers, 144 weeks.

Prices are likewise under heavy pressure. Since 2019, power transformer prices have increased by 77% cumulatively; distribution transformer prices have risen by 78% to 95%; and generator step-up transformer prices have risen by 45%. Key raw materials driving costs higher—grain-oriented electrical steel prices have nearly doubled since 2020, and copper prices have increased by more than 50% in the same period. Both are essential inputs for transformer manufacturing.

The rate of demand growth has far outpaced the supply side’s ability to respond. Since 2019, demand for generator step-up transformers has increased by 274%, and for power transformers by 119%, while the expansion of domestic manufacturing capacity has not kept up.

Highly Concentrated Raw Materials Supply, Structural Bottleneck Hard to Resolve Short-Term

The transformer shortage is not simply a matter of insufficient capacity; its root cause is the structurally concentrated supply chain of raw materials. The grain-oriented electrical steel required for transformer cores is a highly engineered material that provides steel with special magnetic properties, which is essential for efficient power conversion. In the United States, Cleveland-Cliffs is the only domestic producer, with facilities in Pennsylvania and Ohio.

This means that all U.S. transformer manufacturers relying on domestic steel are dependent on the same source. If this source faces capacity bottlenecks, price pressures, or supply disruptions, the impact will immediately ripple through the entire domestic transformer manufacturing system.

At the same time, about 80% of large power transformers in the U.S. are imported, mainly from Mexico, South Korea, and other international manufacturers, exposing critical infrastructure to risks from global supply chain fluctuations.

The Biden administration previously allocated $500 million under the CHIPS and Infrastructure framework to Cleveland-Cliffs for upgrading electrical steel plants. However, reports indicate that key terms of this funding have been re-examined during the current administration, making the timeline for expanding domestic steel capacity uncertain.

Three Demand Waves Emerge Simultaneously, Supply-Demand Gap Continues to Widen

The current surge in transformer demand is not driven by a single factor, but is the result of three simultaneous, overlapping demand waves.

AI data center construction is the fastest growing source of demand. Large-scale data centers require massive power transmission and distribution infrastructure. A single major AI training cluster can require hundreds of megawatts of electricity and needs transformers at multiple points throughout the distribution chain. According to Morgan Stanley’s research, even if a project has secured land, servers, and funding, if the region lacks sufficient generation capacity, transmission networks, or key electrical equipment, the pace of development will still be slowed.

Industrial electrification is the second wave of demand. Manufacturing facilities are converting fossil fuel-driven processes to electrified systems, creating additional transformer demand at the facility level and further straining the grid.

Grid modernization is the third, continuous demand wave. America’s aging transmission infrastructure requires a massive transformer replacement effort, and this process was already lagging behind even before the AI and electrification waves hit. The three types of demand do not share a common peak period and are all active concurrently, with no signs of slowing in the short term.

New Capacity Unlikely to Relieve Short-Term Shortages Before 2028; Procurement Strategies Must Be Advanced

Nearly $2 billion in funding has flowed into North American transformer production expansion. New capacity from companies like Hitachi Energy and Siemens Energy is expected to come online around 2028. However, this new capacity cannot fill the current supply gap—projects executed before 2028 must still face today’s market realities.

For industrial developers and infrastructure planners with projects under construction, strategic adjustments must be made immediately. Equipment procurement planning must precede project financial approval, rather than waiting for budgets and approvals to be finalized before requesting transformer quotes.

Signing long-term supply agreements with transformer manufacturers is becoming a source of competitive advantage—companies that secure delivery slots years in advance will gain schedule advantages that cannot be replicated in the spot market. Additionally, projects with flexibility in grid interconnection timing can consider early communication with utility companies to fully understand the practical constraints on equipment delivery.

In the current supply-demand landscape, transformer delivery lead-times are no longer just a supply chain management issue, but a key variable directly determining the pace of U.S. industrial expansion and the rollout of AI infrastructure.

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