Power transformers and distribution transformers will face supply deficits of 30% and 10% in 2025

As electricity consumption continues to surge in the US, pressure on power infrastructure such as transformers has intensified, with a supply shortage for power and distribution transformers to hit 30% and 10%, respectively, in 2025, according to a recent report from Wood Mackenzie, a leading energy research and consultancy firm.

According to the report "Untangling the US transformer supply chain crisis," since 2019, Wood Mackenzie estimates that US power and distribution transformers have seen demand surge by 116% and 41%, respectively. This has been due to a confluence of new demand drivers, including a rise in electricity consumption, which has increased 7% since 2020, reversing a 1% decline from 2010 to 2020, the growing pipeline for clean energy projects and aging infrastructure.

"This surging transformer demand has created a significant supply deficit, with domestic manufacturing capacity unable to keep pace," said Ben Boucher, Senior Analyst, Supply Chain Data & Analytics at Wood Mackenzie. "Utilities are routinely turning to the import market to meet project timelines. In 2025, imports will account for an estimated 80% of US power transformer supply and 50% of the 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."

Supply has not kept pace with demand, resulting in a growing market deficit across all transformer specifications and escalating lead times and prices.

Policy changes and tariffs also affect market
According to the report, policy shifts further complicate transformer supply chains, as the rapidly evolving trade landscape in the US will exacerbate recent price increases for transformers.

"The passage of Trump's 'One Big Beautiful Bill' (OBBBA) will change the demand outlook for step-up transformers due to cuts in clean energy support," said Boucher. "Transformer costs are expected to increase due to new tariffs, as both imported and domestically produced units will be subject to higher unit costs due to the wide array of new tariffs, with more, including 50% on copper, set to come into effect in August, further intensifying the cost increases."

Some relief on the way
To meet demand, many of the largest Original Equipment Manufacturers have announced investment into capacity expansions totaling $1.8 billion since 2023, specifically targeting the North American market. While this will alleviate some pressure, the demand growth rate will necessitate further expenditure to rebalance the market, according to the report.

"The US transformer market stands at a critical juncture, with supply constraints threatening to undermine the nation's energy transition and grid reliability goals," said Boucher. "The convergence of accelerating electricity demand, aging infrastructure and supply chain vulnerabilities has created constraints that will persist well into the 2030s."

Boucher continued, "The path forward requires coordinated action across multiple fronts. Utilities must embrace standardization to unlock manufacturing efficiencies, while policymakers need to balance trade protection with supply security. 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, potentially derailing grid modernization efforts and clean energy deployment."