The United States is already running low on electrical transformers, and as demand for the equipment keeps rising due to overdue upgrades and grid expansions, manufacturers can’t keep up.
Hitachi Energy is throwing nine figures at the problem. On Wednesday, the Swiss-headquartered power equipment giants announced plans to spend $106 million to expand its transformer components factory in Alamo, Tennessee. (Hitachi Energy is a subsidiary of the Japanese industrial goliath Hitachi.)
The investment “will significantly boost production of transformer bushings,” which are interface parts that go between two energy-transmitting components in a transformer, the company said. Once complete, the facility will become the largest bushings manufacturing site in North America, and one of the largest in the world.
The expansion will add 60,000 square feet to the factory, including 35,000 square feet for manufacturing, 20,000 square feet of warehouse space, and 5,000 square feet of offices. Construction is scheduled to finish by mid-2027.
“We’re not only increasing our ability to deliver vital components to customers across the U.S. and the world, but we’re also making a long-term commitment to the Crockett County community,” Steve McKinney, Hitachi’s head of transformers in North America, said in a statement. “This facility plays a critical role in meeting fast-growing energy demand from AI as well as grid expansion and modernization, and we’re proud to grow our footprint and strengthen domestic manufacturing right here in Tennessee.”
The company started its manufacturing expansion in 2023, and ramped up last year by spending $1.5 billion on transformer assembly lines and doubling down on direct-current equipment.
It’s badly needed. Since 2019, demand for power transformers, which raise and lower the voltage of electricity as it travels through a grid system, surged by 116%, according to estimates from the consultancy Wood Mackenzie. For distribution transformers, which funnel electrons to end users at the appropriate voltage, that figure is 41%. This year alone, power and distribution transformers face shortfalls of 30% and 10% below demand, respectively.
Since 2019, unit costs have risen by 45% for generator step ups, the special type of transformer used in power plants to increase the voltage to a high enough level to go out on transmission lines. Power transformer costs have surged by 77%. Distribution transformers, meanwhile, saw prices soar between 78% and 95%, depending on specifications.
“Supply has not kept pace with demand, resulting in a growing market deficit across all transformer specifications and escalating lead times and prices,” Benjamin Boucher, a senior analyst at Wood Mackenzie, told Latitude Media. “The market imbalance has intensified competition for available production slots, leading to deteriorating lead times and prices across most transformer categories.”
