On April 20, the White House issued a Presidential Determination under Section 303 of the Defense Production Act, formally designating power transformers, substations, switchgear, and their upstream supply chains as essential to national defense. The presidential memorandum authorizes the Department of Energy to bypass normal procedural requirements and immediately deploy federal capital to expand domestic grid manufacturing capacity.
The determination is blunt about why this matters. The document states that America's capacity to design, produce, and deploy large-scale grid infrastructure is "dangerously limited" and that the nation faces "significant risks due to foreign competition, long production lead times, and an overreliance on imported equipment." Without presidential action, the memo concludes, U.S. industry cannot meet these needs in time.
The Import Problem Is Worse Than Most People Realize
The numbers paint a stark picture. The U.S. imports roughly 80% of its large power transformers and 50% of its distribution transformers. For extra-high-voltage units rated at 345 kV and above, foreign dependence climbs past 85%. There is exactly one domestic producer of grain-oriented electrical steel, the specialized material essential for transformer cores. Lead times for large power transformers now average 128 weeks. Some orders take four years to fulfill.
This vulnerability is not new, but it has grown more acute. The rapid proliferation of data centers, the expansion of renewable energy interconnections, and the electrification of transportation have pushed demand far beyond what domestic manufacturers can supply. More than half of U.S. distribution transformers, roughly 40 million units, have already exceeded their expected service life.
Three new transformer factories are under construction in Texas, Alabama, and Georgia. HD Hyundai Electric is expanding its Alabama footprint, aiming to increase U.S. production by 30% this year. Virginia Transformer is undertaking a $40 million expansion in Georgia to boost output by 70%. Multiple other manufacturers are scaling aggressively. But analysts at Wood Mackenzie still project a 30% shortfall in power transformers through 2025, and that gap is unlikely to close quickly.
A Tech Cold War Playbook Applied to Energy
The DPA invocation mirrors a pattern now familiar from the semiconductor industry. The CHIPS and Science Act channeled $33.7 billion in grants and $5.85 billion in loans toward domestic chip fabrication, triggering projects like TSMC's $165 billion Arizona megafacility and Intel's Ohio expansion. The logic was explicit: semiconductors are too strategically important to leave in the hands of foreign suppliers, particularly when roughly 90% of the world's most advanced chips are made in Taiwan.
The same calculus now applies to transformers and grid equipment. The federal government is treating energy infrastructure shortfalls as a national defense risk, and stating outright that market forces, permitting regimes, and capital markets cannot fix them fast enough. Section 303 grants the executive branch extraordinary authority to make direct purchases, issue purchase commitments, and provide financial support for the development of production capabilities. These are the same tools that built the synthetic rubber industry during World War II and scaled ventilator production during COVID-19.
The parallels extend beyond domestic reshoring. Export controls on advanced semiconductors have fractured global technology flows. China's rare earth export restrictions announced in April 2025, and expanded in October to include foreign-made products containing Chinese materials, are constraining American military modernization. ASML's 2026 forecast surge is one indicator of how the chip shortage is reshaping capital allocation. The DPA energy invocations represent the same strategic posture applied to physical infrastructure.
What Comes Next
The determination directs the Secretary of Energy to implement the order, including making necessary purchases and financial commitments. The Federal Register publication establishes the legal foundation, but specific projects, funding levels, and deployment timelines have not yet been identified. The DOE is expected to report to Congress within 90 days.
There are reasons for skepticism. The Biden administration invoked Section 303 for grid equipment in 2022, targeting similar supply chain vulnerabilities. Results were modest. Whether this invocation produces meaningful acceleration depends on execution, not rhetoric.
But the framing matters. The DPA classification places transformers and substations in the same legal and strategic category as aluminum during the Korean War or vaccines during the pandemic. It signals to investors, developers, and manufacturers that federal capital will flow toward domestic grid capacity. And it sets a precedent: infrastructure once considered a matter of utility planning is now a matter of national defense.
The technology cold war between the U.S. and China was always going to expand beyond semiconductors. AI infrastructure demands power. Power demands transformers. And transformers, it turns out, are made mostly overseas. The DPA invocation is the government's acknowledgment that this dependency is no longer acceptable.
