Power Equipment Shortages Add a Second Bottleneck to AI Data Center Builds
Beyond grid connection queues, transformer and switchgear supply constraints are emerging as a further obstacle to AI infrastructure deployment as demand forecasts keep rising.
Large transformers, switchgear, high-voltage breakers and uninterruptible power systems have joined grid connection approvals as a primary obstacle for AI data center developers, a DataM Intelligence analysis published on Thursday (2026-07-16) found. Even when utilities approve a new connection, developers face equipment lead times long enough to delay or halt construction entirely.5
Goldman Sachs Research projects global data center power use will rise roughly 50 percent by 2027 and could surge up to 165 percent by decade's end against 2023 levels. The IEA's base case puts global data center electricity consumption at 945 terawatt-hours by 2030, against 415 TWh recorded in 2024 — a figure that has grown at approximately 12 percent annually for the past five years.3,2
The IEA's 2026 update on energy and artificial intelligence puts the density in per-unit terms: by 2027, an individual server rack within an advanced facility could draw peak power equivalent to that of 65 households. A campus stacking thousands of such racks requires grid infrastructure historically associated with heavy industry. When that infrastructure cannot be sourced, approved connection capacity sits unused.2
Evidence that secured power is increasingly the determining factor in site selection shows up in recent deal terms. In May 2026, the first major AI tenant at Bitzero's Namsskogan site in Norway signed a binding 15-year, $2.6 billion lease for the facility's entire 110 megawatts. Company disclosures cited by OilPrice.com in early July 2026 showed implied annual revenue of $178 million at full capacity and a net operating margin of 85 percent.4 Separately, Bitzero retained CBRE, which manages roughly $6 billion in annual data center transactions, as strategic broker for a 200-megawatt site in Finland.4
The gap between those contracted cash flows and Bitzero's market valuation is wide. As of mid-July 2026, the company trades at a market capitalisation of approximately $130 million while carrying roughly $2.6 billion in contracted revenue, per the OilPrice.com analysis.3 Early movers with locked-in grid connections and binding long-term tenants are generating industrial-scale revenue streams, while the market continues to price them at startup multiples.
Elsewhere, a developer recently proposed a $12 billion data center complex — a scale at which power procurement becomes the primary engineering challenge.3 Projects at that size face the equipment shortage in its most acute form: demand for large power transformers has outpaced manufacturing capacity in the US and Europe for several years, driven simultaneously by AI infrastructure buildout, electrification programmes and grid hardening requirements.
The renewable expansion underway does not close the near-term hardware gap. US installed solar capacity is forecast to reach approximately 737.8 gigawatts by 2035, more than tripling from 231.4 GW in 2024, with total US renewable capacity potentially reaching 1.06 terawatts.1 Wind and solar additions reduce the grid's marginal cost over time, but they do not shorten transformer lead times or interconnection queue backlogs, which currently run to years in most high-demand US markets.
For power markets, the practical implication is timing. Grid approvals already granted represent a theoretical demand pipeline; equipment shortages determine how much of that pipeline becomes operational load, and when. Goldman Sachs's 50 percent power growth projection for 2027 depends partly on whether the hardware enabling it can actually be procured on schedule. Grid operators managing tight reserve margins, and the gas-peaker owners and utilities who serve them, will be watching that gap closely.3,5