Meeting Growing Electricity Demand in the Age of Tariffs, AI, Data Centers and Downturn

The electricity industry is buzzing about increasing load growth. People and businesses need more power for electric vehicles, new housing, artificial intelligence and other new and growing applications.

I spoke with Andreas Schierenbeck, CEO of Hitachi Energy as well as a Senior Vice President and Executive Officer at Hitachi, Ltd., about these drivers as well as the current political landscape of economic downturns, tariffs and, in some places, politicians who are skeptical of clean energy.

Schierenbeck came to Hitachi in July 2024 after working with the German National Hydrogen Council and Brasuro Consulting AG. He has also worked with South Africa-based chemical concern Sasol, German state-owned utility Uniper, Siemens and elevator company thyssenkrupp.

Schierenbeck said we are in the midst of an "energy supercycle" driven by a seismic shift in electricity demand, which is expected to continue for at least 20 years.

According to the IEA’s Electricity 2025 report, global electricity consumption is forecasted to rise at four percent annually through 2027 – the fastest pace seen in recent years.

Drivers

“While the demand from high-growth sectors like AI and data centers has risen sharply, other factors have larger overall impacts on total electricity consumption. This includes the widespread electrification of transport, increasing air conditioning and cooling needs, and decarbonization of energy-intensive industries such as steel and manufacturing, among others,” Schierenbeck said. “Additionally, grid operators are contending with the urgent need to replace and modernize aging grid infrastructure and equipment damaged by extreme weather events.”

Despite fears that clean energy could take a hit following an antipated slowdown in economic activity in the West as well as an ascendance of climate-sceptic politicians in some countries, renewable energy will not slow down.

Global capacity is expected to increase to over 5,520 GW during 2024-2030, with 2.6 times more than the deployment of the six years prior, according to the IEA. According to Wind Europe, there is more than 500 GWs of wind energy just waiting to be connected to the grid in Europe.

“The unprecedented growth in renewable generation and in electricity demand was not something the industry had foreseen or prepared for, and this has given the impetus to technology providers like us to scale up our operations to match that growth,” he said.

This is driving the demand for critical grid infrastructure, most notably transformers, but also extending to solutions like high-voltage direct current (HVDC) and high-voltage switchgear, which is expected to continue for many years, or even decades to come.

“As the demand continues to grow and the reliance on renewable energy sources increases, enhancing the flexibility, resilience, and sustainability of the electrical grid is paramount,” he said.

Transformers Remain Scarce

The paucity of electric transformers that worsened during 2020 has persisted, worsened and may continue to deepen before it improves, he said.

Lead times for transformers have increased from 24 to 36 weeks pre-pandemic, to now average 115 to 130 weeks, and this is only expected to increase. For power transformers in particular, utilities will likely have to wait up to four years if they haven't already secured a reservation, he said.

“For instance, lead times for pad-mounted distribution transformers are two to three times what they were prior to the pandemic. For larger power transformers, such as those used for large-scale transmission projects, lead times are now three years to six years, with specialized transformers taking the longest time,” he said.

In response, the industry, including Hitachi Energy, is investing in new manufacturing capacity to serve this market.

Hitachi Energy is investing to meet fast-growing demand for grid infrastructure. Since 2020, Hitachi Energy has invested over $3 billion in manufacturing and R&D, and over the next three years, will invest an additional $6 billion to ramp up global production capacity and to enhance its capabilities in engineering, R&D, digital and partnerships to accelerate the clean energy transition.

“Within this overall investment, we have committed $1.5 billion to expand global transformer manufacturing capacity of which, a third is earmarked for North America,” he said.

Between 2020 and 2023, Hitachi Energy made significant investments in its power transformer production in South Boston, Virginia, dry-type transformer facility in Bland, Virginia and distribution transformer facility in Jefferson City, Missouri, he said.

More recently, the company made investments of $100 million to upgrade our power transformer facility in Varennes, Quebec, $26 million USD for power transformer production in South Boston, Virginia (on top of $37 million in recent investments in that same facility), and $70 million for a new distribution transformer facility in Reynosa, Mexico.

“At CERAWeek recently, we announced an additional $250 million USD to expand our global transformer insulation and components manufacturing to help the industry scale faster to meet the accelerating demand,” he said.

Impact on Clean Energy

It’s too early to say how recent developments are likely to impact renewable energy development in the U.S., he said.

“The reality is that electricity demand will continue to grow, and renewables can be a very cost-effective way to meet that demand,” he said.

Hitachi Energy is currently engaged in a number of major grid infrastructure projects, particularly long-distance transmission systems, which are intended to support the integration of renewable energy sources into the grid, such as SunZia Transmission and Champlain Hudson Power Express, both of which are expected to come online within the next year or so.

“As a global business operating in more than 100 markets worldwide, we source and manufacture across many regions and have built a resilient and diversified supply chain that allows us to adapt efficiently to evolving trade policies,” he said.

Before recent developments, U.S. operations may have been viewed as one part of a diversified global strategy. Today, there may be a renewed focus on U.S.-based capabilities as businesses explore ways to build resilience and serve a growing domestic market focused on energy transformation, he said.

“It’s true that establishing or expanding manufacturing capacity in North America can require globally sourced components. Like most businesses, we are monitoring the situation and, as a truly global company, we remain adaptable and focused on serving our customers reliably and efficiently,” he said.

Some other manufacturers of power grid supplies that have announced new supply chain investments:

In Albuquerque, N.M., a unit of ABB opened a 90,000 square foot, $40 million manufacturing facility to produce components used in grid hardening, undergrounding and wildfire mitigation applications. These include Elastimold cable accessories and Fisher Pierce circuit indicators.

ABB also spent tens of millions on new production facilities in Selmer, Tennessee, and Senatobia, Mississippi. These factories will produce components to serve electrical distribution equipment and circuit breakers for large-scale industrial and technology-driven facilities, including data centers, factories and high-rise residential and office spaces.

April 25, MGM Transformers and VanTran Transformers opened a new 30,000-square-foot advanced manufacturing facility in Waco, Texas. This facility will provide 700 jobs and $1 billion in annual transformer production capacity, the companies said in a joint release.

April 23, GE Vernova said it would invest $600 million in its U.S. factories in Clearwater, Fla. and Charleroi, Penn. These factories make high-voltage instrument transformers and high-voltage circuit breakers.

In South Carolina, Eaton spent $340 million on a new facility in Jonesville that will build three-phase transformers, which it will also continue to build in existing facilities in Wisconsin.

Schneider Electric is spending $700 million through 2027 on facilities in Tennessee, Massachusetts, Missouri, Ohio, Texas and North Carolina. These facilities will produce medium voltage products, build molded case and air circuit breakers, and produce switchgear and power distribution products.

Pennsylvania Transformer Technology (PTT) is spending $102.5 million in Raeford, North Carolina to expand its transformer manufacturing and create some 200 new jobs, according to an announcement from the North Carolina governor’s office.

Mitsubishi Electric Power Products Inc. plans to invest about $86 million to build a switchgear factory in Western Pennsylvania that, once at full capacity, is expected to be home to more than 200 workers.

TMC Transformers USA is spending more than $15.3 million over the next five years in a new manufacturing facility in Waynesboro, Georgia, creating at least 110 jobs, according to an announcement from that state’s governor.

Electric Research Manufacturing Cooperative Inc. (ERMCO) is expanding its transformer manufacturing capacity in Tennessee in a move that company says will create 400 jobs.

The leaders of steel manufacturer Cleveland-Cliffs Inc. said in July they convert part of a shuttered West Virginia plant into a distribution transformer manufacturing center. That project is valued at $150 million.