It’s not just red tape that’s limiting the supply of electricity in America. Grids are physical machines, and they’re short on transformers. 

Electricity has never been as important to the future of the United States as it is today. The country’s biggest businesses are making gigantic capital investments in data centers and chips for artificial intelligence (AI). The White House supports their efforts and aims to “achieve global dominance” in the technology. But electricity threatens to become a bottleneck, as data centers account for 7 percent of US power demand and are rising, with consumers increasingly concerned about rising power costs. And it’s not just AI: abundant electricity is also essential for reshoring domestic manufacturing and installing more efficient, less polluting energy technologies such as heat pumps. 

This increasing demand for electricity requires a strong power grid, and any power grid needs transformers. Transformers are devices that change the voltage of an electric current. A thermal power plant (such as a gas or nuclear plant) generates current at medium voltage; a large transformer’s job is to step the current up to high voltage for efficient, long-distance transmission to end users. The current must then be stepped down again by a smaller distribution transformer for safe use in, say, your fridge. Without these transformers—boxes containing a steel core, copper windings, and (usually) mineral oil for cooling—the power system simply could not function. 

But in recent years, Americans have struggled to get their hands on them. Demand for power transformers increased by 116 percent from 2019 to 2025, with developers complaining that they have to wait more than two years for them. Utilities and construction firms say the shortages are slowing their work down and keeping some projects stuck in limbo, and now the authors of the White House’s AI action plan fear that the nation will be unable to “develop a grid to match the pace of AI innovation.”

A Power Grid Under Strain: Demand, Aging Infrastructure, and Extreme Weather 

A variety of factors have come together to overload this supply chain. 

First, electricity demand is growing again, at nearly 2 percent per year, increasing demand on the generation side (for example, to collect and transmit power from a solar farm) and on the distribution side to get that power to homes and factories. 

Second, the US grid is also aging. The Department of Energy (DOE) warns that more than half of distribution transformers are over 33 years old, nearing their life expectancy. 

Finally, transformers are being knocked out by extreme weather: when Hurricane Helene took out 360 substations’ worth of transformers in North Carolina in 2024, utilities had to search desperately in a market already in undersupply. 

To some extent, high transformer prices are incentivizing new production facilities. Since 2023, firms have announced nearly $2 billion in investments in manufacturing for the North American market, including a giant $457 million Hitachi facility in Virginia. The shortage of most transformer types is expected to ease somewhat by 2030, but power industry insiders warn that they still expect problems with large power transformers. Even if supply chain issues do abate, a general challenge for US electrification is the lack of a sufficiently trained workforce—these newly planned facilities are all competing for the same insufficient pool of workers. 

A Fragile Supply Chain for Transformers

Moreover, there are some problems that markets can’t fix alone. Most transformer cores are made of grain-oriented electrical steel, but only one US company produces it, as Megan Husted and Alice Wu have written in The National Interest. This leaves US-based manufacturers reliant on imports for about 80 percent of transformers, e.g., from Japan or South Korea, which is a political problem for policymakers concerned with re-industrialization and resilience and an economic problem for firms operating under US tariffs.  

Transformers are bespoke products: one estimate suggests there are 80,000 different models. This lack of standardization complicates the DOE’s efforts to address the shortage with measures such as a stockpile or virtual reserve—which transformers should get priority? The government should concentrate its efforts on larger power transformers, which can take months to build and can be the size of a garage, rather than on the myriad of smaller models in different substations around the country. 

The DOE’s grid deployment office can make a difference with grants as well, but it will need more money than the $375 million it received in the  “minibus” of January 2026. Congress is more focused on tax credits for manufacturers, as proposed in the bipartisan Circuit Act, although manufacturers report that efforts to increase the workforce may be even more important than general financial support for production. 

A Bipartisan Opportunity to Fix America’s Grid Bottleneck

Unburdened by the political controversies around coal or solar power, the broken transformer supply chain should be a problem that both parties can work together to solve. Should the United States aim to source transformers as quickly as possible to get new projects plugged into the grid, or balance the need for speed with efforts to produce key components domestically or support the production of next-gen technology such as solid-state transformers? 

What the right solution is depends on one’s perspective of the desired outcome. The good news is that policymakers are becoming more cognizant of the fact that the US grid needs more than regulatory fixes to the invisible interconnection queue and permitting system. The power grid is a physical machine, and it’s missing key parts—addressing the transformer shortage can help.

About the Author: Noah Gordon and Sia Were

Noah J. Gordon is a fellow in the Sustainability, Climate, and Geopolitics Program at the Carnegie Endowment for International Peace in Washington, DC. His research focuses on the nexus of climate change and international politics, including the fields of climate geopolitics and security, global clean energy supply chains, and the interplay between climate change and migration. He co-created a Carnegie podcast about animal agriculture and climate change called Barbecue Earth.

Sia Were serves as a junior fellow at the Carnegie Endowment for International Peace’s Sustainability, Climate, and Geopolitics program, where she contributes to research at the intersection of environmental policy and international relations. Her undergraduate dissertation in Environmental Science examined geothermal energy development in Kenya and California, analyzing how different regulatory frameworks and geological contexts shape renewable energy deployment. 

The post The Missing Piece of the US Power Grid: Transformers appeared first on The National Interest.