Is the Transformer Shortage Over

A few years ago, we started seeing a transformer shortage in the United States that impacted both residential and commercial projects. Many companies with projects, including new developments, were told they had to wait up to three years for a new unit. During that time, some people turned to used and refurbished transformers when possible, but a lot of new projects had to be put on hold or pushed back.

There’s nothing wrong with buying a refurbished transformer, as long as the company you buy from is reliable, reputable, and offers a good warranty. Still, some companies chose to hold out for new transformers despite the long wait time. It seems like many of those people are now finally able to get their hands on the transformers they have been waiting for.

The shortage is finally winding down

Although it’s not completely over yet, the transformer shortage is starting to thin out and more units are becoming available for large projects. One way to know that more stock is available is by checking reputable manufacturer websites, like ELSCO Transformers, who currently have an extensive selection of units that are in stock and ready to ship. This is a big improvement in available inventory and is a good sign that the shortage might be over soon.

If you need a specific transformer and you haven’t gotten on a waiting list yet, now is the perfect time to either buy one from available stock or sign up and hold your spot on a list. While it looks like the shortage is ending, there’s no guarantee.

What caused the transformer shortage?

The shortage was caused by a lack of raw materials, including basic electrical supplies made of steel. This happened when Chinese factories were shut down because of the pandemic.

Not only did the shortage of transformers impact typical supply needs, but the demand for transformers dramatically increased at the same time, which led to extreme discrepancies in supply and demand. Compared to other industries, transformers don’t usually experience rapid expansion, so it’s been rough.

Who did the transformer shortage affect?

Among the first to be hit by the transformer shortage were various renewable energy storage projects, and interestingly enough, those projects are part of what increased the demand in the first place.

In August 2022, the Inflation Reduction Act (IRA) was signed into law to provide tax credits for implementing renewable energy projects across the United States. With the IRA in place, many companies launched projects just to get some tax breaks. This drastically increased the demand for industrial high-voltage transformers.

The worst part of the shortage lasted several years. Even in 2023, some U.S.-based renewable energy projects still couldn’t get the high-voltage transformers they needed to connect their wind farms, solar farms, and batteries to the grid. The waiting period was said to be a minimum of three years. These aren’t your average small transformers found outside of residential houses that can just be purchased used or refurbished easily. The industrial-size transformers needed for these projects are often the size of a truck and some need to be custom built.

Many project developers ordered transformers before they had any signed contracts to sell the power. It was a big financial risk to take, but since the lead times were so long, they didn’t have a choice. They had to act fast and hope for the best. Other developers saw the shortage coming and invested millions of dollars in stockpiling transformers so they could avoid the lead time.

Transformer manufacturers in the U.S. have been slow to increase their capacity because it can get expensive, but with the IRA in effect encouraging more renewable energy storage projects, the manufacturers who do expand their capacity are the ones that will be the most profitable as we ease out of the shortage.

When will the shortage officially end?

Nobody knows when the transformer shortage will be officially over, but the energy industry has been pushing Congress to fix the problem by allocating $1.2 billion to alleviate the issue. President Joe Biden did create an executive order in 2022 requiring domestic production to be increased, but there hasn’t been enough funding.

According to expert predictions, the demand for transformers is going to double by 2027 compared to 2020’s demand. However, investors are supporting a new transformer factory in Mexico along with the expansion of an existing U.S. factory in Louisiana. It’s rumored that other companies, like Siemens AG, might join in to ramp up transformer capacity.

Nobody can predict exactly when the shortage will officially end, but it’s safe to say that as long as production continues to increase and manufacturing plants expand, the shortage should be over soon.