Why Transformers Matter More Than Ever
A perfect storm is brewing in the world of power electronics, and transformers are at the heart of it.
A perfect storm is brewing in the world of power electronics, and transformers are at the heart of it. This article explores the critical role of transformers in the evolving landscape of energy systems.
Modern life has an insatiable appetite for power. We're simultaneously racing towards AGI, reshoring manufacturing, and building incredible networks of EV charging stations. Yet, very few people I speak with are aware of the strategic significance of critical energy infrastructure like transformers.
Transformers are a bedrock component of our energy infrastructure. But what exactly are they, and why do they matter so much?
What is a transformer?
A transformer is an electrical device that takes a given input voltage and outputs a different voltage. In this sense, it can either increase (step up) or decrease (step down) the voltage.
Electrical energy can be challenging to visualise. Think of it like water flowing through pipes, and the electricity is the water. Current is the rate of water flow, and voltage is the water pressure. Modern life requires us to move large quantities quickly, so we build pipelines capable of handling tremendous volumes of fast-moving water. That's all well and good, but what happens when it reaches the end consumer? Turn on the tap, and your apartment would quickly face an epic deluge from the high-pressure water. Remember, we said that voltage is like pressure? Well, in this analogy, transformers serve the function of changing the pressure (voltage) to safe levels for consumption.
Why are transformers so significant?
Transformers are strategically significant because they're a critical part of the power system. Wherever a change in voltage is required, you'll find a transformer. We can think of three main categories:
High-voltage (HV) transformers -> Used for transmission
Medium-voltage (MV) transformers -> Used for distribution
Low-voltage (LV) transformers -> Used for end-use applications
As the US increases its power demands, it needs a corresponding increase in the number of installed transformers. Data centres in particular require large quantities of transformers. New solar and BESS facilities require transformers. The electrification of everything requires transformers.
But the truth is that domestic production lags demand considerably, with 80% of demand for large power transformers satisfied by imports. Power systems are built with redundancy in mind, but when large power transformers fail or are intentionally damaged, the economic costs can run into the billions of dollars. It's no wonder, then, that the National Infrastructure Advisory Council (NIAC) has recommended creating a strategic reserve of transformers.
So what's going on with the supply chain?
Since the pandemic, lead times and costs for transformers have steadily risen. According to the Department of Energy, "the lead times for transformer orders, particularly distribution transformers, increased from three to six months in 2019 to 12 to 30 months in 2023." Much of this is driven by the uncertainty around raw materials, the electrification of everything, the boom of AI data centres, and the recalibration of international trade in an increasingly uncertain world. More specifically, though, the US faces several constraints when it comes to producing transformers. For example, Cleveland-Cliffs is the only domestic producer of grain-oriented electrical steel (GOES) – the steel that is vital for building transformer cores. Then there's the labour shortage across the power engineering sector, the labour shortages across the manufacturing sector, the retiring worker problem, and tariffs to add a sprinkle of uncertainty.
Why is this problem not going away?
There's a perfect storm of converging factors. AI data centres, the electrification of everything, climate and natural disaster-related destruction of energy infrastructure, the replacement of old equipment, and the fresh demands of a 21st-century grid. All of this is happening against a backdrop of geopolitical uncertainty, an international AGI arms race, and the full effects of decades of offshoring production to lower labour cost nations.
This storm will affect most critical energy infrastructure within the US. If we want to build a grid that can keep up with the demands of modern life, we're going to need to do better. We need to address systematically the bottlenecks that plague the industry. The US Government needs to create additional economic incentives beyond those in the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA) to encourage domestic production of critical energy infrastructure. These incentives need to happen at warp speed. Let's look at why...
AI data centres
Consider the following graph, which illustrates projected data centre power consumption.
Total U.S. data center electricity use from 2014 through 2028.
Source 2024 United States Data Center Energy Usage Report
There are profound national security and geopolitical risks associated with AI, and in particular, AGI. In essence, we're in an AI arms race, and the prize is unfathomable human prosperity and riches through technology-led innovation, which also possesses a darker side in the form of superior cyber attack capabilities, even more precise autonomous weapons, and godlike predictive intelligence. Economic dominance is the obvious prize for the nation that controls AGI first. With the stakes so high, it's only natural that America wants training and inference done domestically. And so we are now building increasingly larger AI data centres. The US already has the most AI data centres in the world, but we're not resting on our laurels. For example, the Stargate Project now has 5GW of AI data centres planned, which will use over 2 million chips.
Elon Musk's xAI is taking this race so seriously that they've resorted to purchasing a power plant from abroad, shipping it to the US, and reassembling it, because they couldn't get a US-made one in time.
These are the new norms, and this is why energy infrastructure is so significant. The U.S. is building the most advanced AI data centres, accelerating EV adoption, and reshoring critical industries — all of which demand unprecedented amounts of reliable electricity. Transformers aren’t just a piece of that puzzle; they’re the backbone. Without them, nothing else moves.
Right now, the supply chain for these assets is fragile, slow, and dependent on foreign manufacturing. If we want a grid capable of supporting 21st-century ambitions — from AGI to nationwide electrification — we can’t treat transformers as an afterthought.
This is both a challenge and an opportunity. The challenge is fixing bottlenecks in materials, manufacturing, and skilled labour before the gap between supply and demand becomes unmanageable. The opportunity is for the U.S. to invest in resilient, domestic transformer production and grid infrastructure — creating jobs, strengthening national security, and ensuring we can power the technologies that will define the next century.
In short: transformers are not optional. They are the foundation of everything we’re trying to build. And the time to act is now.
All sources were last accessed on 4th August 2025.