Skyrocketing demand from artificial intelligence data centers is intensifying already severe shortages of critical grid equipment across the United States, pushing lead times for some components beyond three years, driving up costs, and forcing utilities to lock in purchases far earlier than they ever have before as reported by Reuters.

A Shortage Years in the Making

The strain on electrical equipment supplies did not begin with the AI boom. Transformers, the devices used to step up or step down electrical voltage, have faced persistent shortages for the past five years, since demand began to rebound faster than supply could recover from COVID-19-related lockdowns.

But the rapid buildout of AI infrastructure has significantly worsened the situation, according to industry experts.

Lead times for some high-voltage transformers have stretched to multiple years, compared with around a year in 2020 and 2021.

Generator step-up transformer lead times surpassed 160 weeks by the first quarter of 2026, up from an average of 143 weeks in 2024, according to Ben Boucher, senior analyst with consultancy Wood Mackenzie.

For high-voltage circuit breakers, lead times climbed to 125 weeks in the second half of last year, versus 77 weeks in 2023.

While large power transformers are experiencing the most pronounced shortage, Boucher noted that data center construction is also driving demand for equipment such as circuit breakers and switchgear, which are set to face even larger market deficits going forward.

"Equipment availability is becoming the biggest concern for developers as they value time to market so highly," Boucher said.

Data Centers Reshaping the Electrical Equipment Market

The scale of the demand surge underlying these supply pressures is substantial. U.S. data center capacity is projected to reach 110 gigawatts by 2030, up from around 24 gigawatts currently, consuming eight times more electricity than electric vehicles over the same period, according to Wood Mackenzie analysis.

The consultancy firm said data centers' share of the electrical equipment market could swell to 40 percent under accelerated scenarios, compared with just under 2 percent in 2020.

These pressures are also pushing prices higher.

Transformer costs could increase by around 4 percent to as much as 10 percent over the next year, depending on the type, Boucher said.

Delays in obtaining equipment are further complicating the power industry's efforts to bring additional supply online to meet accelerating data center demand.

Last month, federal regulators ordered grid operators to look into new protocols to quickly connect data centers and other large energy users to the grid.

Utilities Forced to Plan Years Further Ahead

The supply crunch has fundamentally altered how utilities approach procurement. California's Roseville Electric Utility used to procure equipment for projects about a year in advance, according to CEO Dan Beans.

The utility is now operating on a three-year timeline to lock down the supplies it needs. But because large transformers for substations are pushing past a three-year waiting time, Roseville is buying equipment for projects it knows are coming five years in advance.

The shift illustrates how utilities are being forced to commit capital well before projects are fully defined, raising planning and financial challenges that fall particularly hard on smaller organizations.

Long-term supply agreements can help ease the strain, but "they don't solve everything, particularly for smaller utilities that don't have the scale," said Louis Finkel, senior vice president of government relations with the National Rural Electric Cooperative Association.

Overseas Suppliers Filling the Gap as Domestic Sources Lag

As transformer shortages have grown more acute, the sourcing landscape has shifted considerably.

At Roseville Electric Utility, about three-fourths of bids are now coming from foreign sources such as China and South Korea, according to Beans.

Domestic suppliers, he noted, typically quote longer lead times and higher prices than their overseas counterparts.

Developers are increasingly sourcing from multiple suppliers across different geographies to avoid dependence on a single region or manufacturer, and are locking in deliveries through long-term agreements, said Miska Pukkila, senior manager of strategic sourcing with Wärtsilä Energy Storage.

In some cases, utilities and developers are also offering more favorable payment terms, or paying upfront, to secure earlier production slots and reduce lead times, Pukkila said.

Other responses include refurbishing older transformers and asking customers to pre-pay for equipment with long lead times, as utilities and developers employ a range of measures to work around the constraints.

Industry Looks to Manufacturing Expansion and Delayed Retirements

In the longer term, the industry is looking at several approaches to address the structural imbalance between supply and demand.

Among the strategies being considered are delaying power plant retirements to maintain available generating capacity while new supply comes online, as well as expanding domestic manufacturing capacity for the components facing the most severe shortages.

Those longer-term solutions, however, do little to relieve the immediate pressures facing utilities and developers who need equipment now to keep pace with the accelerating buildout of AI infrastructure across the country.