Smart Transformers Market Size, Share & Trends Analysis, By Type (Power, Distribution, Specialty, and Instrument), By Application (Smart Grid, Traction Locomotive, Electric Vehicle Infrastructure, and Others), and Regional Forecast, 2022-2029

The global smart transformer market size was valued at USD 1.93 billion in 2021 and is projected to grow from USD 2.14 billion in 2022 to USD 5.22 billion by 2029, exhibiting a compound annual growth rate (CAGR) of 13.6% during the forecast period of 2022-2029.

The market is booming due to increased energy demand, grid modernization, and the integration of IoT and digital technologies, leading to improved grid efficiency and reliability, and is expected to continue growing rapidly

The global impact of COVID-19 has been unprecedented and staggering, with witnessing a lower-than-anticipated demand across all regions amid the pandemic. Based on our analysis, the global market had exhibited a decline of -4.1% in 2020 as compared to 2019.

A smart transformers is a device that can be placed between the power grid and external systems like homes, businesses to provide a buffer. These devices are equipped with advanced features and functionality to support the power grid. 

These kinds of transformers are widely adopted to regulate the voltage and maintain contact with the smart grid such that it allows remote administration in the power system. The growth of the market is driven by increasing investment in developing and strengthening the smart grid and the growing trend for adopting digitalization in the power industry. Additionally, renewable energy solutions such as solar systems are also connected to the primary power grid and altering its operations. The increasing focus on renewable power generation and integration of energy mix, emerges the need for intelligent monitoring and voltage regulation, thereby propelling the global market growth in the projected period.

COVID-19 IMPACT

Limited Investment Opportunities amid COVID-19 to Impede Market Growth

The global market has been intermediately affected by the outbreak of this global health problem, as governments worldwide have taken various steps to eliminate the spread of the virus by imposing lockdown, travel restrictions, social distancing, the closing of workplaces which have changed the lifestyle and working of people around the world. For instance, India’s total demand for grid electricity declined 25% between March and April in 2020 compared to demand in the same period in 2019. The decline in demand has resulted in significant variation in electricity consumption and distribution, which further has disturbed the optimization of production schedules and challenges in power balance due to uncertainties from both the demand-side and generation sides.

The notable delays in constructing renewable projects and requirements for social distancing have delayed the development of renewable energy projects and improvements and up-gradation of grids networks. For instance, in June 2020, the International Energy Agency (IEA) stated that the growth of renewable power is set to decline by -13% compared to 2019 mainly due to lower industrial activities and has leveled off investments and spending on electricity grids, which are the crucial part in integrating variable renewable sources for power generation.

Additionally, the COVID-19 is likely to impact various digital infrastructure companies due to disruptions in the supply chain and organizational changes caused due to travel restrictions. The restrictions have caused delays in shipping equipment's from manufacturing countries such as China, which results in higher input costs and delays in investments.

LATEST TRENDS

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Smart Grid Continues to Play a Key Role in Adopting Smart Transformer

The development of smart grids will provide various advantages such as energy-saving through reducing consumption, reducing balancing cost, leveling the peak demand, accuracy in the electric bill, and other benefits. That makes the power transmission through the grid system more flexible and creates more opportunities for enhanced grid modernization and smart grids for both utilities and customers. Organizations such as European Union (EU) and U.S. models are increasing their adoption of smart grids primarily due to environmental concerns and desire for a reliable and improved energy grid.

The smart grid's preferable characteristics comprise transmission and distribution architecture that resist intentional attacks or natural hazards. Other factors which enhance reliability include the use of transformers. The application of transformers in the power grid would enable the smart grid to work more efficiently and reliably by regulating the voltage at the end-user, resulting from improving the efficiency of the grid. For instance, on March 25, 2021, Hitachi ABB Power Grid, a global technology leader has partnered up with Nanyang Technological University, Singapore (NTU Singapore) for a government lead smart grid project, which is a part of the Singapore Government Energy 2.0 initiative to shape and transform the grid system. The two organizations will advance the developments in solid-state transforms to support power systems transformation for a more flexible system and to facilitate the integration of renewable energy sources. Hence, the adoption of the product in the smart grid is trending the demand to leverage the effectiveness of the transmission system at a wider pace.

DRIVING FACTORS

Growing Digitalization in Power Sector Will Drive Market

The power industry is at the edge of transforming from centralized, conventional, and security threats to distributed energy mix generation and advancement in control systems. Digitalization plays a crucial role in the power industry, including control systems, sensors, industrial software, transformer, Industrial Internet of Things (IIoT) technologies, and others. Digitalization has also been integrated with equipment and devices, which helps improve system efficiency, such as transformer, an integral part of the smart grid, which works independently to regulate the voltage and allow remote administration in the system.

This provides digitalized control and advanced features such as a digital platform to access online, Wi-Fi, Ethernet or cellular options, optimization of asset performance, cybersecurity, and other features that make the transformer play a managerial role in the electric distribution grid. Increased digitalization in the power system has helped control real and reactive power, improve the power quality, limit fault current, and reduce energy consumption. For instance, In February 2021, Enel Infrastructure and Network division has deployed ABB’s TXpert Ecosystem. This product is equipped with data-driven capabilities and analytics, which helps measure the aging of the transformer and contributes to the reliability of the electrical grid. Hence, a broad spectrum of advantages for integrating digitalization into the power industry drives the demand for smart transformers in the global market.

Growing Investments in Alternative Energy Smart Grids to Boost Market Growth

The growing usage of fossil fuels poses a potential hazard to the global and regional environment owing to their emission of carbon dioxide (CO2) into the atmosphere. The GCC countries have some of the highest CO2 emission rates worldwide. Therefore, many countries invest in alternative fuels and energy efficiency and are developing untapped resources, especially shale gas. Alternative fuels are much safer and cleaner than fossil fuels and can improve the environment by reducing air pollutants. The government across the world is also promoting the usage of alternative fuels and enacting several policies. HENCEFORTH, the growing non-linear equipment that supports the renewable energy system increases the risk of grid instability, which creates a threat of electrical grid failure and the risk of damage to the electric equipment required in the renewable energy system. Therefore smart transformers are required to maintain the grid frequency by regulating the voltage.

Smart grid had evolved the power industry to a new transition from static one-way management to dynamic two-way management. It plays a crucial role in optimizing and monitoring the power consumption from the demand side, which helps to save energy and increase efficiency—substantial investments from utilities, government initiatives, and grid strengthening projects from various funding organizations. For instance, in 2021, Northern Powergrid, an electrical distribution company, invested USD 15.86 million in its digital transformation project. The project supports the enhancement of remote network management of the company.

RESTRAINING FACTORS

High Initial Cost Hindering the Installation of Smart Transformers

The major restraint in installing smart transformers is their high equipment cost, owing to many enterprises' reluctance to implement. However, these transformers provide reliability, harmonics elimination, and power factor improvement, which is critical in making the overall energy system efficient, productive, and cost-effective. Furthermore, smart transformers' adoption is also declining due to their ability to withstand extreme weather conditions. The traditional transformers can handle situations like lightning strikes, frequent overheating, and surges with failure. But, transformers have significantly less forgiving due to small transistors and little thermal inertia, which results in regular heat up, limiting its widespread adoption. Moreover, the technological advancement in the transformer is upgrading day-by-day, which makes the end-user spending higher. The integration of advanced technology and redundancy of all the power grid components, such as sensor technologies, monitoring, diagnostics, and cloud computing and analytics, makes it more expensive with the limited improvements for reliable power systems are considered.

SEGMENTATION

By Type Analysis

Expansion of Residential Sector within Distribution Segment, Dominates Market during Forecast Period

Based on the type, this market is segmented into power transformers, distribution transformers, specialty transformers, and instrument transformers. The distribution type segment is estimated to hold the largest market position over the forecast period as it has been widely used to regulate and optimize the voltage power supply and facilitate the energy need. Distribution transformers are less efficient when compare to power transformers as they are subject to load fluctuation and the chances of failure are higher.

These Transformers are used in large commercial facilities to utilize and distribute energy more effectively, resulting in more efficiency, reducing the cost and power consumption, and going greener. The distribution type transformer helps reduce the cost and helps to provide feedback and information about the power supply.

By Application Analysis

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Smart Grid Applications to Lead Market, Accounting for Maximum Share

This market is segmented into the smart grid, traction locomotive, electric vehicle infrastructure, and others based on application. The smart grid application is estimated to dominate the smart transformer market share as it is most commonly used in power systems. The growing focus on renewable energy is expected to propel the demand for smart grid technologies across the energy sector. These devices manage the distribution and flow of energy in smart grids, which ensures the stable growth of smart grid applications.

In traction locomotive, the transformer provides a significant weight reduction and also helps in improving efficiency, reducing electromagnetic compatibility (EMC) and audible emissions.

REGIONAL INSIGHTS

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The market has been analyzed across five key regions which are North America, Asia Pacific, Europe, Latin America, and the Middle East & Africa.

Asia Pacific is the major region in the global market. Countries in the Asia Pacific are strategically focused on improving grid stability and investing in intelligent grid projects. Therefore, using a transformer in the smart grid increases the power quality and grid stability. For instance, China Southern Power Grid plans to invest USD 105 billion in grid network construction during 2021-25. Hence, growing intelligent grid investments and government initiatives boost the regional market.

Europe is expected to hold the second-largest position in the global market during the forecast period. Growing digitalization in the power industry and increasing demand for strengthening the grid drive the market demand. Countries in Europe are focusing on extension, refurbishment, and replacement of aging grid infrastructure, which would help to improve the power quality, monitoring, and energy saving in the grid.

North America is also estimated to hold a significant share in the market during the projected period. As per our market research analysis, North America is expected to witness a healthy market growth. The U.S. held the largest share in North America owing to the significant increase in investments from utilities to upgrade the existing grid infrastructure. For instance, according to the EIA report 2018, investment in transmission infrastructure in the U.S. peaked at USD 35 billion in 2016. Hence, increasing investments and growing demand for grids led to the market's growth.

The Middle East & Africa continuously focuses on renewable power generation and energy mix power generation, which emerges the need for the grid and intelligent equipment. For instance, according to the Middle East Solar Industry Association, energy investment in the Middle East & North Africa region would increase to USD 1 trillion in the forecast period of 2019-2023. Hence, growing investment in the grid, renewable power generation, and government initiatives for grid modernization will lead to the wider adoption of transformers in the power grid. This, in turn, is accelerating the demand for transformers in the regional market.

KEY INDUSTRY PLAYERS

ABB Focuses on Developing New Products and Upgrading Existing Devices to Strengthen its Product Portfolio

The global market is fragmented and has witnessed high competition from several regional and global participants. ABB is currently one of the world's largest power services companies, and through its advanced services, it continues to dominate the global market. The company continues to focus on providing world-class services to its customers worldwide.

• On January 19, 2021, Hitachi ABB partnered with Vietnam to expand its local manufacturing of transformers. This enables Hitachi ABB to strengthen its electrical network and integrate more renewable energy.


• In July 2020, ABB completed 80% of its Power Grid business to Hitachi. This enables ABB to focus on key market trends and customer needs in electrification, automated manufacturing, digital solutions transportation, industry, and product sustainability.

Additionally, other key players include Schneider Electric, Siemens, Eaton, Mitsubishi Electric Corporation, and GE Power, among others. Key companies across the industry are continuously striving to introduce a highly efficient portfolio with environmental effects and easy integration features.

LIST OF KEY COMPANIES PROFILED:

• ABB (Switzerland)


• Schneider Electric (France)


• Siemens (Germany)


• Mitsubishi Electric Corporation (Japan)


• Eaton (Ireland)


• Alstom (France)


• GE Power (U.S.)


• Powerstar (England)


• CG Power and Industrial Solutions Limited (India)


• Ormazabal (Spain)


• SPX Transformer Solutions Inc. (U.S.)


• Triad Magnetics (U.S.)

KEY INDUSTRY DEVELOPMENTS:

• April 2023 - Eaton invests $500+ million in North American manufacturing, boosting essential technology capacity for infrastructure projects, specifically transformers. Signifying a significant step in strengthening regional manufacturing capabilities.


• April 2021 - GE’s Renewable Energy Grid Solution and Hitachi ABB Power Grids signed a landmark agreement to reduce the environmental impact in the electrical transmission industry. The agreement includes complementary share intellectual property of power technologies and accelerating efficient insulation and switching gas in high-voltage equipment.


• October 2020 -  Schneider Electric launched EcoStruxure Power and Process, which integrates the engineering design, operations, maintenance and optimizes the decision-making process. The launch of EcoStruxure has enabled various industries to cut down the traditional barriers between power systems and process control systems and enter a new era of digital efficiency.


• February 2020 - On February 25, 2020, Eaton Corporation has completed its acquisition of Power Distribution Inc. (PDI), a leading supplier of mission-critical power distribution, static switching, power monitoring equipment, and services for data centers, industrial, and commercial customers. The company is headquartered in Richmond, Virginia, and is reported within the Electrical Americas business segment with sales of USD 125 million in 2019. The acquisition will enable Eaton Corporation to build power management technologies and services and improve the quality of life and environment.

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The global smart transformer market research report presents a comprehensive industry assessment by offering valuable insights, facts, industry-related information, and historical data. To formulate the market research report, several methodologies and approaches have been adopted to make meaningful assumptions and views. Furthermore, the report covers a detailed market analysis and information per market segment, including type, applications, and regions, helping our readers get a comprehensive overview of the global industry.

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