Transformer Crisis is Threatening America ⚡

It was the summer of 1950. Five years had passed since World War II. Some sort of normalcy had returned to America — factories that had once made weapons were back to making appliances, soldiers came home, and the world was at peace. 

But, soon it all changed. 

On June 25, 1950, some 75,000 North Korean troops crossed the 38th parallel, the line that had divided the Korean peninsula in two, and entered the South. Seoul, the capital of South Korea, fell in three days. And just like that, the United States found itself staring at another conflict it was not prepared for.

After WW II ended, the U.S. defense industry had wound down; private companies had no incentive to convert, and the clock was running. President Harry Truman had to make America war-ready again. And on September 8, 1950, Congress gave him a tool to do that: the Defense Production Act.

The DPA helped President Truman mobilize the economy for war: directing industries, controlling prices, and making sure the country had what it needed to fight. 

It worked well enough that no president who came after him wanted to be caught without it. The act has been reauthorized more than fifty times since 1950, and multiple U.S. presidents have invoked it. 

On April 20, 2026, the DPA was used again. 

In fact, President Trump issued five presidential determinations in a single day, all invoking Section 303 of the Defense Production Act, all directed to Secretary of Energy Chris Wright. 

They covered oil, natural gas, LNG, coal, and power generation. But one stood apart: Presidential Determination 2026-10, focused on grid infrastructure, equipment, and supply chain capacity. 

But here’s the bigger question: why has U.S. grid infrastructure and its supply chain security been thrust into the spotlight, and how could this make or break America’s AI race? To understand all of this, we need to start with the story of the transformer, a key player in the U.S. grid, and how it came to America and, over time, how it left. 

It is not an exaggeration if we say that in the 1830s, London was the center of the world. The British Empire was at its peak, and the Industrial Revolution was remaking everything it touched. 

It was here, at 21 Albemarle Street in London’s Mayfair, that Michael Faraday laid the scientific foundation for the modern transformer. On August 29, 1831, Faraday wound two coils of wire around an iron ring, connecting one to a battery and the other to a galvanometer, then watched. The moment current passed through the first coil, the needle on the second briefly twitched. Electricity had jumped across iron without a physical connection.

Faraday called it electromagnetic induction. It was this idea that led to the invention of the transformer and eventually the modern power grid itself.

But it took the world nearly fifty years to build something useful with the electromagnetic induction principle. In 1881, a French engineer named Lucien Gaulard and his British financier partner John Dixon Gibbs demonstrated the first practical transformer device in London — a machine that could finally take Faraday's principle and handle real amounts of power. 

Across the Atlantic in the United States, industrialist George Westinghouse saw the patents and immediately understood their potential. In the summer of 1885, he purchased the U.S. rights to the transformer design and imported several of the devices — along with a Siemens AC generator — to begin experimenting in Pittsburgh. He handed the task to his brilliant young engineer named William Stanley, with one instruction: turn the laboratory curiosity into commercial equipment. 

By March 1886, he had built the first complete AC distribution system in America. High-voltage current flowed through the streets of Great Barrington, Massachusetts. By 1890, the Westinghouse Electric Company had established over 300 central AC stations across the United States, and by 1895, those same transformers were carrying electricity from Niagara Falls to Buffalo.

By the turn of the century, Westinghouse wasn't the only American giant in the transformer business. In 1903, General Electric acquired Stanley's company — the Stanley Electric Manufacturing Company of Pittsfield, Massachusetts — the same factory where Stanley had perfected his designs. When GE walked in, it employed 1,700 people. By 1915, one in six residents of Pittsfield worked at the plant, and it produced 4,800,000 horsepower in transformers (roughly 3.6 million kilowatts of transformer capacity) per year. 

Interestingly, the mass production of transformers did something no single invention had done before: it made electricity ordinary. In 1890, American homes rarely had electricity. In 1910, one in seven American homes was wired for electricity. By 1930, that number had risen to seven in ten, according to a Yale University study titled, Electricity Consumption: Culture, Gender and Power.

With advancements in transformer technology, the growth story of the transformer continued into the early 1900s. Subsequent technological developments made transformers more efficient and lucrative. For example, the introduction of silicon steel for transformer cores reduced energy losses and allowed for more compact and efficient designs. These advances rode the explosive growth of the U.S. electric grid through the early and mid-20th century.

At its peak, from the 1950s through the 1970s, the U.S. was among the world’s dominant hubs for transformer manufacturing, supported by the rapid expansion of North America’s electric grid.

And then came the downfall. 

When it rains, it pours, they say. The phrase fits perfectly for the U.S. transformer industry. 

The first was saturation. For fifty years, U.S. electricity demand grew nearly 7% — a pace so steady that giants like GE and Westinghouse bet everything on it, building massive factories and hiring thousands of workers.

But by 1970, they had reached saturation. That is because the national grid was essentially finished, and the era of rapid expansion came to a grinding halt. Because they had built the grid so well (the transformers had a shelf life of 20-40 years), new orders vanished, leaving those giant factories with surplus equipment.

The second was the oil crisis. In 1974, energy prices spiked, and utilities canceled expansion plans en masse. Between 1974 and 1978 alone, 184 large generation plants were canceled, representing over 155,000 MW of planned capacity, according to American Affairs Journal. No new plants meant no new orders, and factories built for expansion had nothing left to build. This further gutted transformer demand. 

The third was Wall Street. Throughout the 1980s, financial pressure pushed large conglomerates to cut anything that wasn't generating sufficient returns. In November 1986, GE announced it was shutting the Pittsfield transformer division. GE sold the transformer technology to Westinghouse. Westinghouse sold it to ABB — a Swiss-Swedish conglomerate. One hundred years of transformer technology, built in the U.S., had passed quietly into foreign hands.

Then there was globalization and free trade agreements. In the mid-1990s and early 2000s, whatever domestic manufacturing remained moved first to Mexico, where lower labor costs made the economics irresistible, then to Asia. For example, by the 1990s, General Electric effectively moved its core transformer manufacturing to a joint venture in Mexico (Prolec GE). 

By the 2000s, however, the geography of dependence shifted. The United States increasingly relied on imports from South Korea, China, and Mexico, as cost-competitive Asian manufacturers and nearshoring hubs captured a growing share of utility procurement. 

Today, a big share of America’s transformer supply is no longer made at home. So how dependent is the U.S. today, and on whom? Let’s break it down. 

According to Wood Mackenzie, imports now account for an estimated 80% of U.S. power transformer supply — the large units that step up voltage to move electricity over long distances from power plants to substations — and 50% of distribution transformer supply, the smaller units on every utility pole and street corner that step that voltage back down to a safe level for homes, offices, and factories

So, where is America getting its transformers from? 

By volume, China dominates. In 2023, China supplied 191 million transformer units to the U.S. — a 67% share of total imports. Mexico was second at 47 million units, and Germany third. By value, the picture shifts: Mexico leads at $2.3 billion, or 42% of total import value, followed by Canada at $524 million. However, Mexico's high-value dominance is largely an illusion of geography rather than genuine Mexican industrial capacity — the majority of those exports come from American, European, and Japanese multinationals like GE, Hitachi, and ABB operating factories in Mexico.

According to trade statistics, for the most critical category — large power transformers, the high-voltage units that carry the bulk of national electricity — South Korea, Mexico, and Canada are the primary suppliers, together accounting for nearly 30% of annual imports. 

Globally, with roughly 60% of global transformer production capacity, China rules the transformer industry. The numbers from China's own customs data tell the story plainly. In 2025, China shipped a record 64.6 billion yuan — roughly $9.3 billion — worth of transformers, nearly 36% higher than the year before. And early 2026 suggests the pace is accelerating, not slowing. In the first two months of 2026 alone, China's large power transformer exports rose 61% year-on-year — with shipments to the United States up 182%

Interestingly, China controls not just finished units but the upstream supply chain — steel cores, copper windings, transformer components — that Mexico, South Korea, and Canada all depend on. 

And transformer demand in the U.S. isn't slowing; it's surging. Since 2019, demand for power transformers has risen 116%, and for generation step-up transformers — the large units that connect power plants to the grid — it has risen 274%. Even the smaller distribution transformers have seen demand jump by 30% to 80%, depending on specifications. 

So, what’s causing the surge in demand? 

For decades, transformer demand in the United States was predictable, tied to slow grid expansion and occasional replacement cycles. But today, multiple forces are hitting the system at once, compressing years of demand into a much shorter window.

First, the grid itself is aging — and this is not a theoretical risk, it’s a forced replacement cycle. Much of America’s transmission and distribution infrastructure was built between the 1960s and 1980s, and transformers — with a typical lifespan of 25 to 40 years — are now reaching the end of their lifecycles simultaneously.

The National Renewable Energy Laboratory estimates that the United States has between 60 million and 80 million distribution transformers in service, and more than half are over 33 years old, nearing or exceeding their expected lifespan.

As these units age, failure rates rise, maintenance costs climb, and utilities are left with no choice but to replace them to maintain grid reliability.

But replacement demand is only part of the story. A new wave of electricity demand is now building on top of it. After nearly two decades of flat growth, U.S. electricity consumption is rising again, with utilities projecting 2% to 4% annual increases. This shift is being driven by electrification across the economy — from electric vehicles to renewable energy projects.

But the most disruptive force altering the U.S. energy landscape is AI.

Each new hyperscale facility draws power equivalent to a small city, requiring large volumes of high-capacity transformers to connect, convert, and stabilize that load across the grid.

Overall, national electricity demand is now projected to rise 16% over the next five years — triple the forecast from just a year ago.

So, what has all these demands and a supply base that simply cannot keep up created? 

Longer lead times and rising prices. 

Before 2020, large power transformers could typically be delivered in 12 to 18 months. Today, according to industry experts, lead times routinely exceed 2 to 4 years, with some projects stretching even longer.  

According to the North American Electric Reliability Corporation (NERC), the gap between order and delivery has widened dramatically. By 2024, average lead times reached roughly 120 weeks — more than two years — while large power transformers stretched to 210 weeks, or up to four years. Even smaller distribution transformers, used to step down voltage for homes and businesses, are now backlogged by as much as two years.

In extreme cases, high-voltage units are now taking up to five years to procure, delaying everything from renewable projects to AI data centers. Prices have followed the same trajectory. Since 2019, transformer costs have surged by roughly 70% to 80% for large units and by as much as 90% for some distribution transformers. 

It isn’t just transformers. The same constraints are now spreading across the rest of the grid’s most critical equipment. High-voltage circuit breakers — essential for controlling and protecting power flows — are facing extreme delays, with lead times stretching to 150 weeks (nearly three years), roughly double pre-pandemic levels

Switchgear systems, which bundle breakers, switches, and control equipment, are taking 40+ weeks to deliver. And much of this equipment isn’t made in the United States. Global giants like ABB, Siemens, and Schneider Electric dominate the market, with manufacturing concentrated in Europe and Asia.

High-voltage cables — especially those used for long-distance and renewable power transmission — now take two years or more to procure. For high-voltage direct current (HVDC) systems, the United States has almost no domestic manufacturing capacity, relying heavily on European and Asian suppliers. 

The impact of this supply chain disruption has already unfolded. Nearly half of planned U.S. data centers are expected to be delayed or canceled — not for lack of capital, but due to shortages of transformers and grid equipment, according to Bloomberg.

So what is the United States doing about it?

Washington is turning back to industrial policy — pushing new investments into grid manufacturing while invoking the Defense Production Act to signal that things are getting electrified! 

In December 2025, President Donald Trump made the stakes explicit: the race for artificial intelligence would define the next era of global power — and there can be only one winner, either the United States or China. And one of the things that is standing between the U.S. and AI supremacy is the grid equipment shortage.  

The response has already begun to take shape as a new investment cycle. After decades of underinvestment, major global manufacturers are now pouring capital into transformer and grid equipment production. 

Hitachi Energy is investing more than $1 billion to expand U.S. grid manufacturing, including $457 million for a new large power transformer facility in South Boston, Virginia—the largest of its kind in the country.

Siemens Energy is deploying $1 billion across U.S. manufacturing—from a new switchgear plant in Mississippi to transformer expansion and gas turbine production in North Carolina, alongside component manufacturing in Alabama, while GE Vernova has pledged over $300 million to scale domestic production of grid equipment. 

Eaton is adding more than $500 million into North American electrical manufacturing, and Schneider Electric has announced over $700 million in U.S. investments focused on grid modernization and electrification. Together, these moves signal a clear shift: the industry is expanding again after years of contraction.

But manufacturing capacity takes years to build, and demand is rising faster than supply can respond.

This is where the Defense Production Act comes in. By invoking the Defense Production Act in 2026 for grid infrastructure, the U.S. government is doing more than signaling urgency — it is giving itself the authority to direct capital, prioritize contracts, and accelerate domestic production of critical equipment. 

This allows Washington to treat transformers, grid components, and energy systems the way it once treated steel, weapons, and industrial goods during wartime mobilization. The goal is not just to increase supply, but to rebuild a domestic industrial base that can support long-term energy and AI expansion.

But will this wave of investment make the United States self-sufficient in grid equipment anytime soon?

That is far easier said than done. Transformers are not standardized, mass-produced products like solar panels or consumer electronics. They are highly customized machines, often designed for specific locations on the grid. According to the U.S. Department of Energy, the U.S. relies on roughly 80,000 different distribution transformer designs — a level of complexity that makes scaling production slow and difficult.

Even when capital is committed, capacity takes time. Building a new transformer factory can take four to five years, and since 2022, roughly $2 billion has been committed across new facilities — with at least three major plants currently under construction. Yet none are operational at scale. 

The constraint runs deeper than factories. Every large power transformer depends on grain-oriented electrical steel — and in the United States, production is effectively concentrated in a single domestic supplier, creating a critical bottleneck. Add to that the heavy reliance on imported copper, a key input for transformer windings, and the challenge becomes even more complex with the tariff factored in. 

The U.S. transformer and grid equipment manufacturing industry, much like shipbuilding, has steadily ceded its dominance to foreign competitors. Today, it is heavily reliant on imports — particularly from China — for both finished equipment and critical upstream components. 

Reversing that dependence will take more than headline investment announcements. It will require sustained industrial policy, coordinated rebuilding of the supply chain, and direct government intervention. 

This newsletter was written by Shyam Gowtham