A monopoly in the production of grain-oriented electrical steel threatens to curb America’s clean energy transition.
Grain-oriented electrical steel (GOES) is crucial to the functionality of grid infrastructure. But even with its crucial role, the industry is experiencing unprecedented supply chain vulnerabilities since domestic production is dependent on a single manufacturer. The United States needs to introduce more competitors into this market and diversify the domestic source of this crucial material. Doing so could be the difference between achieving a clean energy transition and hamstringing America’s ability to meet its present and future energy demands.
Transformers are the backbone of the electric grid, with 90 percent of all electricity passing through one on its path from generation to consumption. Transformers are how you can get usable electricity into your homes, businesses, and factories.
But there’s a critical bottleneck in the supply chain for this essential piece of infrastructure: a monopoly most Americans have never heard of.
Transformers are traditionally made with grain-oriented electrical steel (GOES). In the entire United States, only one company produces this essential material—Cleveland Cliffs, which produces GOES in Ohio and Pennsylvania. Neither factory produces enough volume to fully meet the demand from domestic transformer manufacturers. Moreover, the GOES produced by Cleveland Cliffs has a limited range of size and weight options, and the company is unable to meet the needs of large transformer designs requiring widths greater than their facilities’ capabilities.
GOES is just one of many products Cleveland Cliffs produces, and its business is driven by the larger steel industry, which is cyclical and highly dependent on the performance of the overall economy. Currently, economic uncertainty, tariffs on input materials, and a global oversupply of steel are hurting the steel industry, including Cleveland Cliffs, making it unlikely that the company will invest in expanding its GOES manufacturing capacity anytime soon, despite a simultaneous global shortage of GOES. Moreover, the transformer industry itself has a history of boom-and-bust cycles, making it risky to invest in expanded GOES manufacturing capacity to serve transformer manufacturers in case that demand collapses. These same factors also disincentivize other steel manufacturers from entering into the GOES market.
A newer, more efficient alternative to GOES that has emerged is amorphous steel. However, amorphous steel has not yet been widely adopted by domestic transformer manufacturers, and like GOES, the material is only produced by a single company in the United States — Metglas — which produces even smaller volumes of this material compared to Cleveland Cliffs’ GOES.
The result? A crippling supply chain vulnerability and a heavy reliance on foreign imports.
Because of the limited volume of electrical steel produced in the United States, transformer manufacturers import the majority of their electrical steel, primarily from Mexico, Canada, South Korea, and China. This import dependency leaves America vulnerable to global trade disruptions and tariff wars, driving up both costs and lead times precisely when we need to be accelerating the clean energy transition and grid modernization.
How can we fix this vulnerability?
We believe a key solution could be the Defense Production Act (DPA). The DPA, which is defined in legislation to include energy systems, can be used to develop and expand the production capacity of domestic sources for critical components, critical technology items, materials, and industrial resources that are essential for the execution of national defense. Electrical steel is crucial to achieving national defense goals, thus justifying the use of this authority. More specifically, DPA Title III can be invoked, which allows the president to execute appropriate financial incentives to alleviate these supply chain vulnerabilities.
The Biden administration issued a presidential determination in 2022 that the shortage of grid components like electrical steel and transformers meets the conditions required to justify the use of DPA Title III. This determination remains active under the Trump administration, and with the One Big Beautiful Bill, which allocated $1 billion for DPA use, there is a path forward. With multiple national security priorities competing for attention, grid supply chain resilience deserves prominent consideration.
This issue has also gained recognition in the recent draft legislation of the Cheap Energy Act, which would, if passed, appropriate $2.1 billion to DPA Title III for the expansion of domestic manufacturing of transformers and grid components, including amorphous steel and GOES, among other purposes.
Federal policies like DPA can correct for the transformer and electrical steel market failure, derisk the construction of new facilities, and unlock faster grid modernization. Utilizing money from the DPA can kickstart an expansion in domestic manufacturing capability. More funding will ultimately be needed for lasting change — which could be done by building entirely new facilities for electrical steel production, retooling other steel facilities to produce electrical steel, and investing in expanding the technical workforce needed to make this happen. The end goal should be to enable the development of electrical steel and transformer manufacturing projects that will close the supply-demand gap and end the current domestic monopolies on grid-oriented and amorphous electrical steel.
True energy dominance requires a robust, competitive industry with multiple players—not a fragile monopoly that threatens both the clean energy transition and America’s ability to meet present and future energy demands.
About the Authors: Megan Husted and Alice Wu
Megan Husted is a Climate and Energy Associate at the Federation of American Scientists, where she supports FAS activities to strengthen the U.S. electrical grid and explores intersections between grid technology and other domains, such as AI, climate policy, and economic competitiveness. Before joining FAS, she was Special Assistant in the Office of Electricity at the Department of Energy, working to ensure the reliability, resilience, security, and affordability of the U.S. grid. Husted received her M.S. in Environmental Justice and Environmental Policy from the University of Michigan School for Environment and Sustainability.
Alice Wu is a Senior Associate at the Federation of American Scientists, specializing in clean energy policy. She works on clean energy deployment and supply chains, with a focus on underinvested domestic industries, such as critical minerals, next-generation geothermal energy, and low-carbon concrete. Prior to joining FAS, she conducted research on solar cells as a graduate student at the Massachusetts Institute of Technology. Alice received her S.M. in Electrical Engineering from MIT and her B.S. in Electrical Engineering from Columbia University.
Image: Shutterstock/M-SUR
