An Electric Transformer Shortage Is Impeding Grid Expansion, Transformation
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An Electric Transformer Shortage Is Impeding Grid Expansion, Transformation

22 June 2023 / Report

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There is a shortage of electrical distribution transformers in the US, with wait times of often more than a year and prices quadrupling in some cases. As a result, electrification and construction projects are being delayed or even canceled at a time when grid expansion and modernization are key for increasing resilience and meeting renewable energy goals.

Insights for What’s Ahead

  • Wait times for some transformers have gone from weeks to over a year,1 and costs for finished transformers have soared in some cases by more than 400 percent since 2020,2 placing residential and commercial construction projects—including those that support electrification and clean energy goals—at risk and impeding the resilience of the grid, particularly in the case of natural or man-made disasters.
  • Supply shortages that affect US utilities and their business and residential customers are the result of two main issues: 1) the US produces almost no grain-oriented electrical steel (GOES), a key transformer material, and 2) the country relies too heavily on foreign manufacturers for production of large power transformers (LPTs).
  • Strategies to boost domestic production and capabilities are being explored by the electric and construction industries as well as by the federal government—including use of the Defense Production Act—as transformers are critical during this time of grid modernization and electrification.

[1] Alexander C. Kaufman, The U.S. Is Running Low on the Machines Needed to Avoid Blackouts and Quit Fossil Fuels, HuffPost, May 19, 2023.

[2] Alex Strong, NAHB, Other Trade Groups Urge Congress to Act on Transformer Shortages, National Association of Home Builders Blog, December 8, 2022.

There is a shortage of electrical distribution transformers in the US, with wait times of often more than a year and prices quadrupling in some cases. As a result, electrification and construction projects are being delayed or even canceled at a time when grid expansion and modernization are key for increasing resilience and meeting renewable energy goals.

Insights for What’s Ahead

  • Wait times for some transformers have gone from weeks to over a year,1 and costs for finished transformers have soared in some cases by more than 400 percent since 2020,2 placing residential and commercial construction projects—including those that support electrification and clean energy goals—at risk and impeding the resilience of the grid, particularly in the case of natural or man-made disasters.
  • Supply shortages that affect US utilities and their business and residential customers are the result of two main issues: 1) the US produces almost no grain-oriented electrical steel (GOES), a key transformer material, and 2) the country relies too heavily on foreign manufacturers for production of large power transformers (LPTs).
  • Strategies to boost domestic production and capabilities are being explored by the electric and construction industries as well as by the federal government—including use of the Defense Production Act—as transformers are critical during this time of grid modernization and electrification.

[1] Alexander C. Kaufman, The U.S. Is Running Low on the Machines Needed to Avoid Blackouts and Quit Fossil Fuels, HuffPost, May 19, 2023.

[2] Alex Strong, NAHB, Other Trade Groups Urge Congress to Act on Transformer Shortages, National Association of Home Builders Blog, December 8, 2022.
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Author

Erin McLaughlin

Erin McLaughlin Erin McLaughlin

Senior Economist, ESF Center
The Conference Board

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