Currently, we are facing a crucial global challenge as we transition from fossil fuels to renewable energy sources. The rapid change in energy structure has increased the instability of energy systems. In 2021, countries like the United Kingdom, Germany, Spain, Portugal, and the Netherlands experienced rising electricity prices, leading to a new energy crisis in Europe. According to some research institutes, European natural gas prices surged by over 250% during this time, and storage levels hit record lows. Additionally, Australian coal prices doubled within a year, and crude oil prices exceeded USD 85 per barrel. The growing concern over energy shortages has sparked a global panic.

The global shortage is not limited to electricity alone. Shortages of electrical equipment are also affecting numerous industries. In 2023, Elon Musk pointed out that transformers will become increasingly scarce in the next few years. A transformer is a device that utilizes electromagnetic induction to change alternating current voltage. Its main components include coils and a core. Transformers are crucial for voltage, current, or impedance conversion and play a central role in power distribution systems. This shortage is now posing risks to grid construction in Europe. The lead times will be extended, and it will impact the electricity bills as well. Similarly, due to supply shortages, lead times for transformers in the United States continue to extend. But why has this common equipment in power distribution networks suddenly become so scarce?

(Source: Eurostat)

One of the most important reasons is the continuous upgrade of the power grid, which needs more modern and smarter transformers. With the widespread adoption of AI technology and the development of renewable energy, the electricity demand has surged. According to IEA forecasts, global power consumption from data centers was roughly 460 TWh in 2022, and their total electricity consumption could reach more than 1,000 TWh in 2026. Consequently, upgrading the power grid and various distribution equipment is imperative. In some developed countries, the history of grid construction dates back to the 19th century. However, many of the current transformers are no longer fully suitable for today’s electricity demands. For instance, approximately 70% of the U.S. power grid and distribution facilities are too old to use, which is a significant concern of transformer aging. A report from Global Market Insight forecasts strong growth in the U.S. transformer market, with a value of USD 11.2 billion in 2023 and an expected CAGR of 7.8% from 2024 to 2032. Despite this, the United States relies on imports for over 80% of its transformers, and the country became the world’s largest importer of transformers as of 2022.

(Source: Global Market Insight)

Not only the United States but also other industrialized countries like Germany, the United Kingdom, and China are updating their power grid systems. Despite the high demand, transformer manufacturers have not met the production efficiency of what customers expected. Over the past two years, Wood Mackenzie found that lead times for transformers have increased significantly, rising from approximately 50 weeks in 2021 to an average of 120 weeks by 2024. Additionally, transformer prices have surged by more than 60% since 2020. It appears that the COVID-19 pandemic has impacted transformer manufacturing and delivery efficiency, and even after the pandemic, the situation has not improved.

Why aren't these manufacturers expanding production? Expanding production not only requires upgrading equipment or setting up new production lines but also increases corresponding labor costs. The transformer industry has a lengthy investment return cycle. Some manufacturers may need decades to achieve financial equilibrium. Although there have been global efforts over the years to solve the climate problem and reduce carbon emissions, no one can accurately predict environmental policies 20 years later. Therefore, these transformer manufacturers have been hesitant to increase production capacity. Another challenging issue is the shortage of skilled workers and engineers, particularly those who are knowledgeable in transformer manufacturing. Even if manufacturers take a year to train new workers, they have to face the risk that the workers might leave at any time.

The ongoing transformer shortage can also be attributed to a crucial factor—scarcity of raw materials. The pandemic and the Russo-Ukrainian War have caused prices of high-quality steel, metal materials, and petroleum to spike. Since January 2020, essential materials for transformer cores such as grain-oriented electrical steel (GOES) and non-grain-oriented electrical steel (NOES) have seen significant price hikes. Wood Mackenzie's research indicates that GOES prices have surged by nearly 100% and copper prices have risen by approximately 50% during the same period. Additionally, geopolitical tensions and shipping congestion have also contributed to the increased raw material prices.

In an era of high demand for transformers, choosing a reliable manufacturer is very important. Among the industry leaders, Chinese transformer manufacturers stand out for their competitive prices, high-quality products, and shorter lead times. As a manufacturer deeply engaged in the transformer industry for more than 30 years, CEEG is a national high-tech enterprise specializing in research, development, manufacturing, sales, and technical services for all kinds of transformers. CEEG has sold its products to more than 80 countries and regions around the world, providing customers with top-quality products. We constantly update our technology and design concepts to align with the advancements in science and technology, while also striving to enhance production efficiency. If you cooperate with us, we guarantee that you will be satisfied with our product quality and flexible lead time!