Supply chain bottlenecks threaten US data centre power ambitions

The US power sector faces an unprecedented supply chain crisis as AI-driven data centre demand collides with decades of underinvestment in electricity infrastructure.  

Our analysis reveals that supply chain constraints, not just regulatory hurdles, now pose the greatest threat to meeting the explosive growth in power demand. 

In our latest Horizons Live Q&A webinar, which followed the publication of our ‘US power struggle: how data centre demand is challenging the electricity market model’ Horizons piece, our experts delved into the key supply chain challenges facing utilities and developers today, and gave advice on how to approach them.  

Read on for a summary of just three of the top Q&As from the session, or fill out the form at the top of the page to download all six of our top supply chain Q&As from the event.  

1. How severe are the supply chain constraints facing gas turbine manufacturers? 

The supply chain crisis in gas turbine manufacturing represents one of the most acute bottlenecks in meeting data centre demand. Wood Mackenzie analysis reveals that global turbine production allocated to the US reaches roughly 10 GW annually by commercial operation date. This falls dramatically short of the 64 GW of committed utility capacity we track across 14 major US utilities. 

The severity becomes clear when examining manufacturer responses. Siemens Energy exemplifies the impossible choices facing the industry – they are retrofitting an existing gas turbine manufacturing facility to produce large power transformers instead. This decision reflects the even more acute shortage of transmission equipment, forcing manufacturers to choose between critical components. 

The turbine order book tells a concerning story. Pre-Covid demand plummeted to unsustainable levels, creating years of underinvestment. While orders have rebounded with data centre announcements, manufacturers remain sceptical about long-term demand sustainability. They refuse to invest heavily in capacity expansion without confidence in a 20-year-plus runway of consistent demand. 

Even projects entering PJM's expedited interconnection process – designed to fast-track dispatchable resources – show delivery dates of 2030-2031 for gas projects. This timeline fails to address the immediate four-year window when capacity is most critically needed. 

2. What is driving the dramatic cost increases in new power plant construction? 

New gas-fired power plant costs have reached unprecedented levels, with projects reportedly coming in at US$2,700 per kilowatt – a staggering increase from historical norms. These costs translate to levelised electricity prices exceeding US$100 per megawatt hour, far above current wholesale power prices across most US markets. 

Several factors drive this cost inflation. Supply chain constraints create bidding wars for limited equipment availability. The 15-year period of flat electricity demand growth left the US power sector without the industrial capacity and skilled workforce needed for rapid scaling. EPC contractors with gas plant construction capabilities are now booking projects through 2031, reflecting severe capacity constraints. 

Labour shortages compound the problem. The industry exemplifies this crisis with 80-year-old nuclear technicians being asked to return to work due to personnel scarcity. Unlike China, which maintained 5% annual electricity demand growth and built industrial capacity accordingly, the US lacks the trained workforce and established supply chains for rapid infrastructure deployment. 

These elevated costs create a vicious cycle. Utilities require long-term offtake agreements to justify investments at these price levels, but data centre developers face uncertainty about long-term demand sustainability and technological evolution. The result is a standoff that could delay critical capacity additions. 

3. How do supply chain constraints differ between regulated and deregulated electricity markets? 

Supply chain challenges manifest differently across market structures, with regulated utilities showing greater ability to navigate constraints. Vertically integrated utilities demonstrate several advantages in managing supply chain risks. 

Regulated utilities can guarantee recovery of prudently incurred costs, providing greater certainty for equipment manufacturers and contractors. This financial backing enables them to secure supply chain commitments that independent developers cannot match. We observe utilities moving forward with gas-fired capacity additions while merchant developers struggle with project economics. 

Integrated resource planning processes, despite their lengthy timelines, provide manufacturers with greater demand visibility. Utilities can commit to multi-year equipment orders through established procurement processes, offering manufacturers the certainty needed for capacity investments. 

However, regulatory processes create their own supply chain challenges. Utilities operate on planning cycles that may not align with rapidly evolving supply chain realities. Recent policy changes could force utilities to revisit approved resource plans, potentially delaying equipment orders and exacerbating supply chain pressures. 

In deregulated markets, the separation of generation from other utility functions creates coordination challenges. Multiple developers competing for limited equipment availability can drive up costs and extend delivery timelines. The lack of centralised planning makes it difficult to optimise supply chain utilisation across the market. 

Download the rest of our six top supply chain Q&As 

To download the rest of the Q&As from the webinar (including what role equipment manufacturers play in constraining data centre development, the effects of supply chain constraints on the timeline for meeting data centre demand, and what supply chain lessons can the US learn from China's approach to data centre infrastructure), simply fill out the form at the top of the page.