The Hidden Bottleneck Strangling AI's $200B Infrastructure Boom
Picture this: You’re a data center developer. You’ve secured $500 million in funding. Your permits are approved. Construction crews are ready. Hyperscalers are lining up to lease your capacity at premium rates.
There’s just one problem.
The local utility just told you they can’t connect you to the power grid until 2029. Maybe 2030.
That’s not a construction delay. That’s a power availability delay. And it’s happening everywhere.
This is the constraint nobody saw coming. While the market obsesses over GPU shortages and cooling systems, there’s a far more fundamental problem strangling AI infrastructure deployment: the electrical grid can’t keep up.
And it’s creating one of the most compelling investment opportunities I’ve seen in years.
The Interconnection Crisis
Let me give you some numbers that should alarm anyone investing in AI infrastructure.
Dominion Energy—Virginia’s primary utility—received interconnection requests for 60 gigawatts of new data center load. That’s more power than the entire state currently consumes.
Their realistic capacity to deliver by 2030? 7-10 gigawatts.
The remaining 50+ gigawatts? In limbo. Indefinitely.
This isn’t unique to Virginia. Across America, grid operators are drowning in interconnection requests they cannot fulfill:
PJM Interconnection (13-state region including Virginia, Pennsylvania, Ohio): 270 GW in queue
MISO (Midwest): 150+ GW in queue
ERCOT (Texas): 75+ GW in queue
CAISO (California): 50+ GW in queue
That’s over 500 gigawatts of generation and load waiting for grid connection. For perspective, the entire U.S. grid currently has about 1,200 GW of total capacity.
Average time to connect? 5-7 years. Some projects are being quoted timelines beyond 2032.
According to Wood Mackenzie, power availability is now adding 24 to 72 months to data center construction timelines. Not the construction itself—just waiting for electricity.
A senior data center executive put it bluntly: “We’ve gone from being building-constrained to power-constrained. The entire bottleneck shifted.”
The Transformer Shortage Everyone Missed
But here’s where it gets worse—and where the investment opportunity becomes crystal clear.
Even when utilities approve grid connections, they face a critical hardware bottleneck: large power transformers.
These aren’t off-the-shelf components. Each unit:
Weighs 100-400 tons
Costs $1-2 million (up from $600K in 2020)
Requires specialized transport (only ~10 super-heavy railcars exist in the U.S.)
Has a 120-week lead time for standard units
For the largest transformers? 210 weeks—over four years
Let me repeat that. Four-year wait times for essential electrical equipment.
According to NERC (North American Electric Reliability Corporation), lead times have more than doubled since 2020. And it’s accelerating.
The U.S. faces an estimated:
30% shortage in large power transformers
10% shortage in distribution transformers
Why? Because 80% of U.S. transformers are imported from Mexico, China, and Thailand. Domestic manufacturing capacity is negligible. And global demand has exploded.
A Texas utility executive told me off the record: “We have approved projects we know won’t energize until 2028 because we physically don’t have the transformers. We ordered them 18 months ago. They’re still not here.”
This is the constraint the market isn’t pricing in.
The Economics Are Insane
While everyone watches NVIDIA’s stock price, something extraordinary is happening in the power delivery market.
Colocation pricing (what companies pay to lease powered data center space) has exploded:
Late 2021: ~$120/kW-month
Late 2022: ~$138/kW-month
Late 2023: ~$165/kW-month
Late 2024: ~$184/kW-month
Early 2025: Trending toward $200+/kW-month
That’s a 53% increase in under four years. And accelerating.
Why? Because in power-constrained markets, colocation space isn’t a real estate product anymore—it’s a power access product.
The scarce resource isn’t square footage. It’s megawatts.
And here’s what matters for investors: the companies manufacturing transformers, switchgear, and power distribution equipment are capturing enormous value with virtually zero competition.
Think about the economics:
Transformers costing $2 million per unit with 3-4 year wait times
Customers offering premium pricing just to move up in the queue
Utilities with no choice but to buy (there are no substitutes)
Lead times so long that new competitors can’t enter the market
This is textbook inelastic demand meeting constrained supply. And it’s going to persist for years.
Premium - The Three Plays Capturing This Value
The thesis is straightforward: electrical infrastructure is now the primary constraint on AI deployment. The companies manufacturing transformers, switchgear, and distribution equipment have unprecedented pricing power, multi-year backlogs, and zero viable competition.
Most are still trading like commodity industrials. They’re not. They’re monopolies with decade-long growth runways.
Here are the three positions I’m building.