Investments in Transformer Manufacturing Aim to Meet Surging Demand

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Electric utilities have been clamoring for a more robust supply chain for distribution transformers for the better part of three years. But they were being stymied over a U.S. Department of Energy (DOE) draft rulemaking to increase the efficiency of those transformers, which are critical parts of a utility's distribution infrastructure.

Earlier this year, the DOE dropped its rulemaking, removing a cloud of uncertainty hanging over the companies that make that equipment. This year likely will be remembered as the year that distribution transformer manufacturers like Hitachi Ltd. (Tokyo, Japan) and Cleveland-Cliffs Incorporated (NYSE:CLF) (Cleveland, Ohio) began making financial commitments to build new manufacturing capacity and expand existing facilities to boost production of transformers around the world.

Hitachi and Cleveland-Cliffs announced investments in three U.S. transformer manufacturing plants this year.

Hitachi also said it plans to expand its existing manufacturing capacity in Canada this year. Subscribers to Industrial Info's Global Market Intelligence (GMI) Industrial Manufacturing Project Database can click here for the project report.

This summer, Schneider Electric SE (Rueil-Malmaison, France) decided to expand two power distribution products in South Carolina. GMI subscribers can click here for the project report.

Expanded manufacturing capacity should reduce prices and shorten wait times, both of which shot up in recent years. Although each electric utility's procurement experience is unique, many agreed that prices and wait times for new distribution transformers tripled or more compared to 2021, utility officials have told Industrial Info.

Hitachi's major investment decisions in 2024 included:

• An expansion of the high-voltage switchgear and breakers factory in Mount Pleasant, Pennsylvania. This expansion seeks to double production capacity for high-voltage switchgear and breakers, including dead tank breakers, gas-insulated switchgear and hybrid switchgear. Click here for the project report.
• An expansion in the distribution, power, and traction transformer factory in South Boston, Virginia. This plant expansion will increase the production of large distribution transformers. Click here for the project report.

"Demand for electrical equipment, including transformers and switchgear, is surging globally, and significantly in North America, and one of our highest priorities is making sure that we are growing our capabilities to address our customer's present and future needs," Andreas Schierenbeck, Hitachi Energy's chief executive, said in a statement announcing the new investments. "To achieve our goals, we will continue to expand and optimize our footprint in the North American region, leverage our expansive global presence and prioritize R&D and innovation to drive the energy transition without compromising safety and reliability."

Transformer manufacturers like Hitachi Energy are "overwhelmed" and can no longer meet the demand for grid equipment required for crucial infrastructure projects worldwide, he told the trade news outlet Data Center Dynamics last month. He said the explosion of data centers, and their attendant demand for new transformers, means that manufacturers will struggle to boost the output required to upgrade grid infrastructure.

Earlier this year, Cleveland-Cliffs said it would turn its idled Weirton, West Virginia, manufacturing plant into one that makes grain-oriented electrical steel for electric transformers. In a second-quarter earnings call, company executives confirmed the company would invest $100 million to repurpose an idled tinplate factory in the Mountain State into an electrical distribution transformer production plant. The grain-oriented electrical steel plant is expected to open during the first half of 2026, but Cleveland-Cliffs President and Chief Executive Officer Lourenco Goncalves said the company could begin operations before the end of 2025. The state of West Virginia will invest an additional $50 million to repurpose the idled plant. GMI subscribers can click here for the project report.

A shortage of distribution transformers has caused some utilities to delay or halt economic development projects or construction of new residential subdivisions. Larger transformers are deployed at power generation sites, including renewable energy projects. A shortage of those larger transformers is one of several factors delaying the connection of renewable generation to the electric grid.

"Ramping up capacity is an issue. It's not easy, and it will probably not ramp up fast enough," Hitachi Energy chief Schierenbeck told the Financial Times.

Subscribers can click here for the project reports mentioned in this article and click here for the related plant profiles.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).