Why do eddy currents cause energy loss in transformers?

In transformers, eddy currents are circulatory electric currents induced within a conducting material by a rapidly fluctuating magnetic field. These currents cause energy loss because they dissipate power as heat within the core material.12

In the context of materials science, engineers mitigate this issue by using magnetic ceramics, specifically soft ferrites. Unlike metallic cores, these ceramic materials are highly resistive to electric currents, often achieved by oxidizing grain boundaries during processing. By increasing the resistivity of the core, the material effectively suppresses the formation of eddy currents, thereby reducing the conversion of signal energy into waste heat. This makes soft ceramic ferrites particularly advantageous for high-frequency transformer applications.3