crs_reports: R48933

Congressional Research Service reports with summaries, authors, and topic classifications.

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R48933 Electricity Distribution Transformers: Supply, Tariffs, and Policy Options 2026-04-23T04:00:00Z 2026-05-02T05:54:01Z Active Reports Martin C. Offutt   Supply of electricity distribution transformers essential to the electric power grid has been strained in the last few years, with implications for post-disaster recovery and plans for grid expansion. Distribution transformers are located near the service connection with residences and commercial buildings or on industrial sites. The price of transformers has increased sharply since 2020, with data from the Bureau of Labor Statistics reporting the prices of both distribution transformers and large power transformers to have risen roughly 40% from 2020 to 2024 (inflation-adjusted). Coupled with the rise in prices is an increase in the time needed for suppliers to fulfill orders for distribution transformers. According to a February 2024 report by the National Laboratory of the Rockies (NLR), orders are reportedly taking two years to be fulfilled, a fourfold increase compared to pre-2022. The U.S. Department of Energy (DOE) identified 34 original equipment manufacturers in the U.S. market for distribution transformers as of April 2024. They also estimated that 1.5 million units were shipped in 2021. An industry report from 2024 estimated it would take three to five years before sufficient new manufacturing capacity might become operational and alleviate supply issues. NLR estimates roughly half of distribution transformers are over 33 years old and nearing the end of their useful life. The U.S. electric power grid transmission expands at roughly 1% per year, and in 2023, roughly one-third of grid investments went toward distribution infrastructure, implying a need for additional distribution transformers. The United States imports 25% to 30% of distribution transformers chiefly from Taiwan, Canada, and Mexico. Some domestic transformers are made using imported components such as the electrical core that facilitates the crucial voltage transformation, of which between half and three-quarters are imported for incorporation into assembled domestic transformers. Those cores that are instead made domestically obtain 95% of their steel from one domestic supplier. Importation is possible, but imported electrical “steel articles” are subject to 50% tariffs as of August 15, 2025. There are some flexibilities in the supply picture. Manufacturers could choose to increase their production of electrical steel for cores, if willing to reduce their output of other products. Current federal programs provide incentives for expanding production capacity, and several manufacturers have announced they will be utilizing these incentives—competitively awarded tax credits (Internal Revenue Code Section 48C [IRC §48C]). Other recent domestic programs or actions include rebates for purchase of a replacement distribution transformer and a 2022 presidential determination which found that distribution transformers and grid components are “critical technology items” essential to the national defense. Bills currently in Congress, S. 448 and H.R. 4128, would expand the scope of a tax credit, Internal Revenue Code Section 45X (IRC §45X), to apply to the production costs of distribution transformers. In 2022, rural electric cooperatives and other organizations signed a letter to the House and Senate Appropriations Committees requesting $1 billion to address the “supply chain crisis.” Congress may choose to constrict, maintain, or expand statutes affecting supply of distribution transformers. Policy options include the following: Expanding the scope of the IRC §45X credit, a manufacturer credit of 10% the cost of producing certain electrical equipment, to include distribution transformers (S. 448 and H.R. 4128). Modifying the Qualifying Advanced Energy Project Credit (IRC §48C) to reserve a certain dollar amount exclusively for distribution transformers, bypassing the competitive requirement. Creating a virtual reserve by authorizing and funding the federal government to purchase distribution transformers up to a predetermined level (quota). If market activity does not reach the quota over a defined period of time, the government would purchase the difference as the buyer-of-last-resort. Using Title III of the Defense Production Act of 1950 (P.L. 81-774) to address manufacturing capacity. Continuing to fund research and development for new, improved transformers and periodically assessing their technological readiness and adjusting the deployment incentives. https://www.congress.gov/crs_external_products/R/PDF/R48933/R48933.1.pdf https://www.congress.gov/crs_external_products/R/HTML/R48933.html

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