The equipment that steps electricity up and down between power plants, transmission lines and customers has become one of the tightest bottlenecks in the U.S. power build. Wood Mackenzie has warned that the country faces supply deficits of 30% for power transformers and 10% for distribution transformers in 2025, as demand from data centers, factories and new generation outruns domestic production.
"This surging transformer demand has created a significant supply deficit, with domestic manufacturing capacity unable to keep pace," said Ben Boucher, a senior analyst in the firm's supply chain data and analytics team. "Utilities are routinely turning to the import market to meet project timelines."
In a new analysis published on October 15, the firm said demand for electrical transmission and distribution equipment grew by between 35% and 274% from 2019 to 2025, depending on the item, leaving significant supply shortfalls across the sector.
How big the gap is
The demand numbers explain the deficit. Since 2019, U.S. demand for high-voltage power transformers has risen 116% and demand for generator step-up transformers, which connect power plants to the transmission system, has risen 274%, according to EE Power's summary of the report. Substation demand increased 91%, and demand for three-phase pad-mount distribution transformers, the units that serve commercial and industrial sites, rose 77%.
Production has not kept up. Boucher said imports will account for about 80% of U.S. power transformer supply in 2025 and about 50% of distribution transformer supply. "This market imbalance is escalating costs and lead times and is delaying our ability to bring generating plants online in pace with the surging energy demand," he said.
Lead times and prices
The waits are long. Lead times for power transformers and step-up units have exceeded 100 weeks since 2023. In the second quarter of 2025, the latest period in the firm's data, they averaged about 128 weeks for power transformers, roughly two and a half years, and about 143 to 144 weeks for step-up transformers, according to Wood Mackenzie. Power transformer lead times did ease by 10 weeks in the quarter, and switchgear edged down to an average of 44 weeks. Distribution transformer lead times averaged 30 weeks, well below a peak of more than 100 weeks in 2023.
Prices have risen sharply. In an earlier analysis, Wood Mackenzie said unit costs had climbed 45% since 2019 for step-up transformers, 77% for power transformers and 78% to 95% for distribution transformers, depending on specification.
Trade policy adds a new layer of risk. Because the industry depends heavily on imports for finished equipment, components and raw materials, Wood Mackenzie warned that U.S. tariffs could raise the average cost per transformer and lengthen lead times as imports from high-tariff countries become uneconomic. It said the administration's tariffs "could well undo" recent improvements in step-up transformer lead times.
Where data centers fit
The backdrop is a reversal in electricity use. Wood Mackenzie said U.S. consumption has risen 7% since 2020, after a 1% decline between 2010 and 2020, driven by rapid data center expansion, a near doubling of manufacturing construction spending after the 2022 Inflation Reduction Act, and other new loads.
Data centers are one of several drivers, but they hit the categories that are already short. Wood Mackenzie said the U.S. data center pipeline totaled more than 125 GW in the first quarter of 2025, with monthly additions averaging 226 MW over the previous two years. Combined with a 96% jump in manufacturing construction spending over three years, that has boosted demand for distribution transformers, switchgear, breakers and wire.
A large campus needs equipment at every level. It requires high-voltage transformers at the substation that connects it to the transmission grid, medium-voltage switchgear inside the site and many pad-mount units to feed individual buildings. Any new power plant built to serve the campus also needs its own step-up transformer. When each of those items carries a two-year wait, the schedule for energizing a data center is often set by equipment deliveries rather than construction.
The EIA, cited by EE Power, expects commercial electricity sales to rise 3% this year and 4.5% in 2026, driven by data center demand.
Will it ease?
Wood Mackenzie expects improvement, but slowly. It projects the power transformer shortfall could fall from 30% this year to 5% by 2030, and the step-up transformer deficit from 47% to 14%, as new factory capacity comes online. The firm said the step-up transformer shortage could narrow to about 140 units by 2030, from more than 700 in 2025.
Not every category improves. The three-phase pad-mount shortage is likely to worsen, Wood Mackenzie said, because of growth in industrial sites, data centers, electric vehicle charging and manufacturing plants. Those are the units that sit at the end of the line, feeding individual buildings.
Boucher argued that easing the shortage will require action on several fronts. "Utilities must embrace standardization to unlock manufacturing efficiencies, while policymakers need to balance trade protection with supply security," he said. "Investment in workforce development and raw material supply chains will prove equally critical. Without decisive intervention, extended lead times and elevated costs will become the new normal."
What it means for the AI build
The shortage changes how developers and utilities plan. Production slots now have to be reserved years in advance, which pushes buyers to commit capital before projects are certain. Wood Mackenzie noted that long lead times combined with a large pipeline of projects are already causing delays and cancellations.
It also favors buyers with scale. Hyperscalers and large utilities can place framework orders across many projects, while smaller developers compete for whatever capacity is left. Standardized designs, which Boucher recommends, would help manufacturers build faster, but they require utilities that have historically specified custom units to agree on common specifications.
For grid planners, the lesson is that interconnection queues and generation shortages are only part of the story. Even when a data center has a utility commitment and a power supply, the transformer that links them may not arrive until 2027 or 2028. That makes equipment procurement as much a part of the race for AI capacity as land, chips or power contracts.