AI Data Centers Stir Up Equipment Shortages for U.S. Power Companies
The swift rise of artificial intelligence (AI) data centers in the United States is creating challenges for power companies. According to a recent report, these companies are now compelled to secure essential electrical gear years ahead of time, adding to the strain on limited supplies.
The demand for crucial components like transformers, circuit breakers, and switchgear has surged, leading to delayed deliveries and increased costs. Supply shortages for transformers have been ongoing since demand outpaced production recovery after the COVID-19 pandemic. Industry experts noted that the construction of new AI data centers has intensified these pressures, extending the wait time for high-voltage transformers from around a year in 2020 to several years now.
Ben Boucher, a senior analyst at Wood Mackenzie, stressed that the availability of equipment is becoming a significant issue for developers, who are under pressure to get their projects up and running quickly. With large power transformers in short supply, the demand from data centers is also impacting other equipment types, like circuit breakers and switchgear, which are anticipated to face even larger deficits.
Increasing Demand for Grid Equipment
Wood Mackenzie predicts that the capacity of U.S. data centers will grow from approximately 24 gigawatts (GW) today to about 110 GW by 2030. In more aggressive growth models, the share of data centers in the electrical equipment market could leap from nearly 2% in 2020 to around 40%.
Lead times for specific transformers have skyrocketed, exceeding 160 weeks for generator step-up transformers in early 2026, compared to an average of 143 weeks in 2024. The lead times for high-voltage circuit breakers have also risen — now hitting 125 weeks in the latter half of last year, up from 77 weeks in 2023.
This growing demand is driving up prices as well, with estimates suggesting costs for transformers could increase by 4% to 10% in the upcoming year, depending on the equipment type. Although long-term agreements can help ease some challenges, smaller utilities are still likely to struggle.
Early Equipment Procurement
To cope with longer delivery times, utilities and developers are now ordering equipment much earlier than in the past. Some are even renovating older transformers, diversifying their suppliers, and in certain cases, requesting customers to pre-pay for long-lead-time equipment.
Roseville Electric Utility in California has adjusted its procurement timeline, moving from ordering equipment a year in advance to a three-year timeline. Due to shortages, some equipment is now being ordered up to five years ahead of project launches. Developers are broadening their sourcing strategies to include multiple regions rather than depending on a single supplier.
Additionally, many developers are providing flexible payment options or paying upfront to secure quicker production slots, which can shorten waiting times. The CEO of Roseville Electric Utility noted that about 75% of their bids now come from overseas suppliers, particularly from countries like China and South Korea, as domestic manufacturers often quote longer lead times and higher prices.
Looking Ahead
The power industry is also thinking about long-term solutions to alleviate supply constraints and expedite equipment procurement. Options include boosting domestic manufacturing for electrical equipment and delaying the retirement of certain power plants while new infrastructure is being built.
These shortages come at a time when the U.S. power sector is striving to meet the increasing electricity demands from AI data centers while minimizing delays tied to grid connections and new projects.
