By Dan Giamo
The United States is running short on the equipment that keeps its lights on. The components supporting our grid are difficult to procure, increasingly costly, and, for certain equipment, largely imported. That strain will only grow as electricity demand surges from AI data centers, electrification, and domestic manufacturing.
Luckily, a template to solve the problem already exists.
In February, the Trump administration announced Project Vault—a $12 billion initiative to build America’s first strategic reserve of critical minerals for civilian industry, backed by a $10 billion Export-Import Bank (EXIM) loan. Project Vault is still in its early stages, and important questions remain about its implementation. But the model it established—an EXIM-backed, demand-driven, public-private reserve that protects American competitiveness—has already demonstrated that the federal government can move quickly and at scale.
The next use for this model is obvious. America’s grid equipment shortage the reliability of the electric power system along with the economic growth and national security that depend on it. Call it Project SURGE—the Strategic U.S. Reserve for Grid Equipment.
The U.S. grid is under more pressure than at any point in modern history. Nearly one third of transmission infrastructure and one half of distribution infrastructure is near or past its intended lifespan. Electricity demand is skyrocketing, requiring new grid infrastructure. At the same time, extreme weather events are damaging existing infrastructure more frequently. Together, these factors have resulted in record grid equipment demand.
American supply chains have not kept pace. The equipment underpinning the electric system is increasingly expensive and hard to get. Prices for key components like transformers have quadrupled. Lead times have doubled, in part because of a yawning dependency on imports and uncertain supply chains. About 80% of large power transformers and 50% of distribution transformers are imported, and even domestically manufactured grid equipment relies heavily on imported inputs like laminations, stacked cores, and electrical steel.
These constraints have real consequences. Grid equipment shortages have delayed clean energy projects, limiting electricity supply while costs skyrocket, and caused data centers to sit empty waiting for power. Dwindling reserves of spare equipment leave utilities less able to restore service after disruptions, prolonging outages that already cost the economy over $120 billion a year.
The private sector and government have taken steps to address the shortage, but not at the necessary scale or speed. Manufacturers have committed nearly $2 billion to North American transformer manufacturing expansions since 2023. It will take years for all these facilities to come online, however, and many manufacturers are reliant on imported inputs. Industry operates vital stockpile programs—such as the Edison Electric Institute’s Spare Transformer Equipment Program and the Grid Assurance program—but these are generally limited to providing emergency backstops of specific components to large utilities and transmission owners. Electric cooperatives, public power utilities, and commercial and industrial customers are largely left out, as are domestic manufacturers who depend on imported inputs.
To support record-high demand, serve all consumers, and enable domestic manufacturing, a grid equipment reserve requires both a significant infusion of capital and coordination with a broad cross-section of industry. Building on the Project Vault model, EXIM can provide the capital to facilitate a large-scale grid equipment reserve designed around the actual needs of grid equipment consumers and manufacturers. Critically, SURGE can be executed within EXIM’s current authorities and requires no new money from Congress.
EXIM would provide a direct loan to an independent corporation—let’s say SURGE Co.—to purchase and store critical equipment and inputs needed for domestic equipment manufacturing. The government would not dictate what SURGE Co. stockpiles. Instead, it would bring together participants—utilities, power producers, data centers, other consumers, and domestic grid equipment manufacturers—to work with SURGE Co. to identify what goes into the reserve, mirroring Project Vault’s approach and avoiding duplication with existing private sector stockpiles. Like Vault, participants would pay a commitment fee for guaranteed access, which would fund loan repayment, storage, and other costs.
Participants would draw from the reserve in emergencies like supply disruptions, foreign export restrictions, natural disasters, or attacks. They could also draw for routine use, provided they replenish the reserve—like Vault. This inventory rotation smooths demand, prevents technological obsolescence, and keeps the reserve fresh.
The stable demand pull created by SURGE can also act as a tool to bolster U.S. domestic manufacturing. While statutory limitations may require SURGE Co. to initially purchase imported equipment, replenishments could be sourced from domestic manufacturers to boost production at home. And by stockpiling critical inputs, SURGE can give domestic manufacturers the supply chain certainty they need to invest in expansion.
Project Vault proved the federal government can move decisively to protect vulnerable supply chains. The grid equipment shortage is a version of the same problem. EXIM should work with industry and agencies like the Department of Energy to launch SURGE before the next crisis forces the issue.
This article originally appeared at Real Clear Energy
