Transformers: rise of the beasts?

A transformer is needed to step the voltage up or down at every inter-connection point in the grid. Hence this 14-page note explores how renewables and EVs will expand future transformer markets. The main challenge is that the need for smaller, simpler units may exacerbate margin pressure in an already competitive industry. So who is best-placed?

It is sometimes said that ‘electrification is the future’ or that the 21st century energy system will primarily be about ‘moving electrons’. So how do you actually “move electrons”? The physics of power distribution and transformers are explained on pages 2-6.

What is changing in the energy transition is that renewables and EV chargers are being added to the grid. Each inter-connection likely requires a transformer. The market impacts are quantified on pages 7-10.

What costs and consequences? We break down the cost of transformers on pages 11-12, with upside for specific raw materials. Recent raw material inflation has already increased transformer costs c12% in 2021. Deploying more renewables will create mild inflation in transformer costs (in c/kWh) for downstream power consumers.

Who benefits? The commercial landscape is explored on pages 13-14, including a screen of leading companies that manufacture transformers. The market is competitive. Hence we focus on who might be better-placed.