Like all other parts of the data centre industry, the market for transformers is experiencing a significant spike in demand to support power needs in facilities. That means the race is on to ensure a big enough supply for the future.
This will be needed to support a doubling in electricity consumption by data centres globally from 448TWh in 2025 to 980TWh by the end of the decade, according to Gartner forecasts. In today’s largest market, the US, the Department of Energy has predicted growth from 176TWh in 2023 to as much as 580TWh by 2028 – tripling from 4.4% to 12% of electricity use.
“There’s been a massive increase in demand for electrical equipment like transformers for data centres,” says Mac Spiller, chief commercial officer at industrial transformer provider Maddox, based in Battle Ground, Washington. “Everyone wants to build those facilities right now.”
Shortening the pole
However, one challenge is that supply-chain disruptions exacerbated by the Covid-19 pandemic have resulted in lead times that can be a couple of years or more, with Spiller describing transformers as the “long pole in the tent” for US data centres over the past five years.
But he says this is starting to iron itself out. Part of this is down to major manufacturers making significant investments to expand their production capacity in recent times, with Spiller estimating that lead times have halved in the country in the past year to an average of 20 to 30 weeks.
At the same time, procurement and supply strategies have been honed in line with the need to look further ahead amid the rapid but unpredictable acceleration in large-scale and edge AI data centres.
“Data centre procurement folk have become smart about how they buy electrical equipment,” says Spiller. “They’re purchasing much further in advance for projects in the future and reserving capacity in anticipation of building rather than buying as the need arises.”
Forward-looking transformer providers are also implementing strategies to accommodate this behavioural shift, allowing more fluidity in what data centre players ultimately purchase if the industry outlook changes over time.
Forward planning
“At Maddox, we allow customers to reserve manufacturing capacity ahead of time, even if they don’t have their spec fully built,” says Spiller. “It’s critical for procurers to have a partner that understands they may need that flexibility for a last-minute design change and that isn’t going to punish them for something that’s outside their control.”
If a customer buys transformers for a future project and needs to store them during construction, Maddox has storage space across the US to hold equipment and deploy it when the partner needs it later. The company’s field service teams can also address any after-order issues within 48 hours.
Another shift that has occurred in the transformer market is the need to stay in more constant contact with procurers in a ‘relational’ rather than just a transactional arrangement. “Buyers now want a supplier that understands the roadmap, not just how to fulfil a one-off order,” says Spiller. “People are buying from companies that they know, like and trust.”
For Maddox itself, he says one advantage is that the company has a streamlined focus mainly on commercial, industrial, renewable and data centre projects rather than utilities. “We don’t have a ton of utility customers, which are the number-one buyers of transformers in the US,” he says. “That allows us to provide equipment without having already full backlogs to support utilities.”
That situation has helped Maddox to accumulate a stock of thousands of transformers, with Spiller saying customers gain access to some of the fastest lead times in the industry while getting the quality, engineering and support of a large OEM.
“We have a massive war chest, so we’re ready no matter what comes,” he says. “Dedicated project managers also provide a single point of contact for customers.”
Strip and rebuild
An additional key differentiator that Spiller highlights at Maddox is that it has a large remanufacturing arm that he hopes will gain more traction in the future, aiding the company’s environmental credentials while enabling it to reuse supplies that already exist and further resolve the supply challenge.
“We take old transformers off the grid, strip them down and rebuild them from the ground up,” he says. “We then ensure that they’re tested and performing just like a new transformer before they ship out.”
Despite the challenges in the industry, Spiller is therefore optimistic about the future, saying that with lowering lead times, the bottleneck for data centres now is becoming more about power generation and transmission than distribution and transformers.
“With all of this North American capacity coming online, the future is bright in the transformer supply chain,” says Spiller. “There’s a trend towards reindustrialisation right now, which I think will result in a much more robust supply for generations.”
Find out more about Maddox and its transformer offering for data centres.
Related stories
