Transformer costs set to rise 4-10% as AI data center boom squeezes US power grid

Transformer costs could rise by around 4% to 10% over the next year, depending on the equipment type, according to Ben Boucher, senior analyst with consultancy Wood Mackenzie, as the rapid expansion of AI data centres adds further strain to an already tight US electrical equipment market.

Transformers, used to raise or lower electricity voltage, have faced supply shortages since demand recovered faster than manufacturing capacity following the Covid-19 pandemic, according to a Reuters report. Industry analysts said the ongoing construction of AI data centers has pushed lead times for some high-voltage transformers from about one year in 2020 and 2021 to several years now, with generator step-up transformer lead times exceeding 160 weeks in the first quarter of 2026, up from an average of 143 weeks in 2024.

Demand from data center projects is also pressuring circuit breakers and switchgear, which are expected to face larger market deficits, Boucher said. High-voltage circuit breaker lead times rose to 125 weeks in the second half of last year, up from 77 weeks in 2023.

To cope, utilities and developers are placing equipment orders years earlier than before, refurbishing older transformers, diversifying suppliers, and in some cases asking customers to pre-pay for equipment with extended lead times. California’s Roseville Electric Utility, for example, now operates on a three-year procurement timeline, up from about a year previously, with some equipment ordered up to five years in advance.

Louis Finkel, senior vice president of government relations with the National Rural Electric Cooperative Association, said long-term supply agreements can help but “don’t solve everything, particularly for smaller utilities that don’t have the scale.”