No AI Without Power: Why the Quad Must Secure Power Equipment Supply Chains

Each year, ahead of the Quad Leaders’ Summit, the foreign ministers of the United States, Japan, India, and Australia convene to review progress on previous commitments and shape the agenda ahead. This group will meet in Washington, D.C., on July 1 to concretize the agenda ahead of the Quad Leaders’ Summit, expected to take place in India in late 2025. AI will be among the key issues on the table. The Quad foreign ministers should prioritize resilient power equipment supply chains to ensure China is not able to use trade embargos on these products to erode our competitive abilities.

The Quad So Far

The Quad has six leaders’ track working groups on: (1) climate, (2) critical and emerging technologies, (3) cyber, (4) health security, (5) infrastructure, and (6) space. In addition to these six working groups, there is the Indo-Pacific Partnership for Maritime Domain Awareness, which was launched at the 2022 Quad Leaders’ Summit in Tokyo to enhance existing maritime domain awareness capabilities. This was further augmented at the 2024 Quad Leaders’ Summit by launching the Indo-Pacific Logistics Network pilot project and a plan to launch the Quad-at-Sea Ship Observer Mission in 2025.

The Quad Ahead

The Quad members seem poised to reduce the number of workstreams and push them to have more concrete deliverables under each. The joint statement issued by the Quad foreign ministers on January 21, 2025, emphasized a shared commitment to strengthening regional maritime, economic, and technological security, as well as the resilience of supply chains. When taken together with certain domestic priorities—counter terrorism for India, oil and gas for the United States, clean energy for India, Japan and Australia, the working groups will likely be streamlined to focus on a handful of areas such as energy security including nuclear, maritime security, artificial intelligence, semiconductors, undersea cables and digital connectivity, ports, and critical minerals supply chains.

Securitizing Power Equipment Supply Chains to Power AI and Data Centers

AI is increasingly recognized as a significant asymmetrical tool for military, economic, and development applications. While some level of cooperation in research, standards, and other agenda-setting policy areas has been discussed in the Quad, there should be a stronger emphasis on another topic- the availability and security of power equipment critical for the explosive expansion of power grids AI is triggering. The power equipment supply chains—transformers, switchgear, power cables, and smart meters—are foundational to modern energy systems. Its vulnerability directly threatens the growth of AI and data centers, which depend on a reliable supply of electricity. As per an estimate by the International Energy Agency (IEA), data centers’ share in system-wide peak electricity demand, in the United States, is expected to increase from the current 6 to 13 percent by 2030. In India, data centers consumed electricity equivalent to 6.5 million households in June 2024.

The expansion of data centers is intrinsically linked to the expansion of power grids, which rely on electrical equipment like power transformers, cables, power lines, and switchgear. The manufacturing of this equipment depends on materials such as copper, steel, grain-oriented electrical steel, and aluminum—all sectors in which China holds a significant global market share. China accounts for 30 percent of overall world trade in electrical machinery and equipment, 25 percent of the total global trade in power transformers (between 2018 and 2023 as per the IEA report), 59 percent and 47 percent of power transformer imports by India and Australia respectively, 40 percent of global copper refining, and 90 percent of global aluminum processing.

This geographic concentration creates a strategic vulnerability—particularly for the United States, which is projected to host more than 50 percent of the world’s new data centers over the next decade. According to the IEA, the United States (3–7 years), Japan (>5 years), and Australia (>2 years) are already witnessing delays in connecting to the grid. Such delays could hinder the growth of the United States–based technology firms, inadvertently boosting the competitive advantage of China-based technology firms in the global AI race and the growth of data centers.

A Way Forward

To diversify and secure power equipment supply chains, the Quad can take the following steps:

• Offer Anchor Investor Incentives to Boost Local Manufacturing

  The Quad can attract major private-sector players to establish manufacturing bases across member countries by offering robust anchor investor incentives. These can take two complementary forms:

  1. First, by providing subsidized capital and blended finance solutions through national development finance institutions. The U.S. International Development Finance Corporation (DFC), Australian Infrastructure Financing Facility for the Pacific, India Export-Import Bank, and Japan Bank for International Cooperation can cofinance large-scale manufacturing projects, especially those producing transformers, switchgear, smart meters, high-voltage cables, and power electronics. A notable precedent is DFC’s loan to Tata Power and First Solar to establish a solar cell and module manufacturing facility in India—a tangible example of strategic cooperation among the Quad members.
  2. Second, the Quad should implement coordinated policy mechanisms that create a level playing field and reduce regulatory friction. These include harmonized tariffs and technical standards across the Quad markets for key power equipment categories, stronger investment screening frameworks to protect critical supply chains from strategic vulnerabilities, and mutual recognition of certifications to facilitate smoother trade and interoperability of electrical infrastructure components. Such policy alignment would not only boost investor confidence but also enable faster market access for jointly manufactured equipment.

• Establish the Quad Co-Manufacturing Hubs in Strategic Geographies

  To ensure a diversified and resilient equipment base, the Quad should enable the development of co-manufacturing hubs that leverage the unique comparative advantages of each member country. While the top global power equipment manufacturers are headquartered in the United States, Japan, Korea, and Europe, the Quad members can pool public incentives and private capital to localize production through joint ventures and technology partnerships.

  These hubs can be anchored in regions offering: (1) cost-competitive manufacturing ecosystems, (2) high-tech innovation clusters, and (3) raw materials. This effort can be supported by aligning and pooling existing national schemes, such as India’s Production Linked Incentive scheme, the CHIPS and Science Act of the United States, Japan’s Green Innovation Fund, Australia’s Rewiring the Nation Plan, and the National Reconstruction Fund. Through such hubs, the Quad can not only reduce over-reliance on single-source supply chains (notably from China) but also build an interoperable and trusted ecosystem of equipment suppliers.

Conclusion

The Quad stands for shared prosperity and development in the Indo-Pacific, and AI has the potential to impact the realization of that objective. There is no AI without energy and resilient power infrastructure. Therefore, true energy security cannot be achieved without securing the power equipment supply chains that underpin modern electricity infrastructure. Strengthening these supply chains will enhance resilience across the broader energy ecosystem and protect against strategic vulnerabilities that threaten the growth of AI and data centers in the Quad countries. The upcoming Quad Foreign Ministers’ Meeting presents a critical opportunity to act decisively—by setting a comprehensive and streamlined agenda ahead of the next Quad Leaders’ Summit.

Shashwat Kumar is a fellow with the Chair on India and Emerging Asia Economics at the Center for Strategic and International Studies in Washington, D.C.