Transformers are critical and expensive components of the transmission grid and play a key role in ensuring consistent electricity flow across long distances. The demand for transformers is increasing, mainly driven by the growth in the transmission and distribution (T&D) segment. They have diverse applications in both conventional and renewable energy plants, as well as in the railway and metro segments. Transformer technologies are continuously evolving towards cleaner options and those that offer easy remote operations and require compact space. The industry is also exploring alternative fluids for transformer oil, such as nano-doped oil and environmentally friendly fluids. Going ahead, the demand for transformers is expected to increase in line with the planned growth of the T&D network, as well as other applications.
Size and growth of India’s T&D network
India’s alternating current (AC) transformation capacity has steadily increased over the years, reaching 1,158.27 GVA across the 220-765 kV levels in June 2023. Between 2018-19 and 2022-23, the AC transformation capacity demonstrated a compound annual growth rate (CAGR) of 6.9 per cent.
In addition, the high voltage direct current (HVDC) transformation capacity stands at 33,500 MW, of which the majority, 54 per cent, is at the ± 800 kV level; 40 per cent at the ± 500 kV level; and the remaining 6 per cent at the ± 320 kV level. Between 2018-19 and 2022-23, the HVDC transformation capacity experienced a CAGR of 10.5 per cent.
In the distribution segment, as per India Infrastructure Research, as of March 2022, nearly 902 GVA of transformer capacity is operational at the 33 kV level and below, across 46 utilities in the country. Between 2017-18 and 2021-22, the transformer capacity witnessed a CAGR of 7.6 per cent.
Industry production trends
As per the Indian Electrical and Electronics Manufacturers’ Association (IEEMA), the share of distribution transformers (DTs) and power transformers (PTs) in the overall domestic power equipment production for 2021-22 has been estimated at 6 per cent and 5 per cent respectively. As a result, the combined value of the DT and PT market is approximately Rs 247.5 billion in the overall estimated market value of domestic power equipment production, which is Rs 2,250 billion. The market size of the transformer industry witnessed substantial growth in 2022-23, contributing significantly to the expansion of the Indian electrical equipment industry during the previous financial year. According to IEEMA, during 2022-23, the PT and DT markets registered a growth of 13.8 per cent and 21.1 per cent, respectively, over the previous year. The increase in market size can be attributed to the renewed domestic demand.
Growth drivers
India’s power sector is witnessing significant investments in the renewable energy segment, including wind and solar power, as part of the nation’s efforts to reduce carbon emissions. Renewable energy addition requires the expansion of the transmission network, which, in turn, will generate demand for transformers. As per the Central Electricity Authority’s (CEA) report, “Transmission System for Integration of over 500 GW Renewable Energy Capacity by 2030”, approximately 25,000 MW of HVDC transformation capacity is expected to be added at the interstate level by 2030. Voltage-wise, the expected additions are 20,000 MW at the ±800 kV level and 5,000 MW at the ±350 kV level. Meanwhile, AC substations aggregating 408,575 MVA capacity are expected to be added by 2030, of which 274,500 MVA are expected at the 765 kV level and 134,075 MVA at the 400 kV level. Overall, the interstate transmission system will require investments of approximately Rs 2.44 trillion. Notably, this additional transmission network capacity includes the interstate transmission schemes for 66.5 GW (excluding commissioned transmission schemes), 55.08 GW and 181.5 GW of renewable energy capacity. It does not include the schemes for the integration of 9 GW of renewable energy capacity into the intra-state network, and 2.5 GW renewable energy capacity for which the location is yet to be identified.
A key programme is the Green Energy Corridors initiative, which is being implemented in 10 states over two phases by Power Grid Corporation of India Limited along with state transmission utilities. The objective is to integrate large-scale renewable capacity addition into the national grid. It involves the development of 20,000 ckt. km of transmission lines and 50,000 MVA of substation capacity at an estimated cost of Rs 220 billion. Phase I of the scheme is set to be completed this year, and the tendering process for Phase II has already commenced at the state level and is expected to be completed by 2026.
In the distribution segment, the central government’s Revamped Distribution Sector Scheme (RDSS) focuses on the strengthening and modernisation of distribution infrastructure, which is expected to create demand for transformers. The scheme has a total outlay of Rs 3,037.58 billion and a five-year implementation timeline (2021-22 to 2025-26). The outlay of this initiative is Rs 1.51 trillion, in addition to a government budgetary support of Rs 733 billion. Schemes such as the Integrated Power Development Scheme, Deendayal Upadhyaya Gram Jyoti Yojana and the Prime Minister’s Development Package-2015 for Jammu & Kashmir have been subsumed under the RDSS. As of now, approximately Rs 1.2 trillion has been sanctioned for distribution infrastructure/loss reduction works and tenders worth Rs 788.27 billion have been issued.
Besides the T&D segment, transformers are essential components in both conventional and renewable energy plants. As a result, the demand for solar step-up transformers from renewable energy developers is expected to accelerate. These transformers raise the direct current (DC) voltage to the required AC voltage before supplying it to the electricity grid. Their ratings typically range from 500 kVA up to 5 MVA (for three-phase 33 kV class transformers). In addition, transformers over the age of 20 years require replacement in a phased manner, creating a potential growth area for the renovation and refurbishment business.
Another key consumer for transformers, especially traction transformers, is the railway segment. These transformers are essential components in the traction chain, significantly influencing train performance and operator services. Indian Railways has electrified 58,812 route kilometres (rkm) as of March 31, 2023, covering approximately 90 per cent of the total broad gauge network (65,300 rkm) of Indian Railways. Additionally, the expansion of metro networks across urban areas is driving the demand for dry-type transformers, typically installed in metro stations.
Technology trends
Transformer technologies such as smart and digital transformers, green transformers, phase shifting transformers, dry-type transformers, ester-filled transformers, convertor transformers, flexible transformers, and coupling transformers are gaining traction. Smart transformers can independently regulate voltage while allowing remote operation and are an integral component of digital substations. Green transformers come with several features such as low noise levels, improved safety against fire due to the use of ester oil and a lower carbon footprint. Phase-shifting transformers are special-purpose transformers, used to control active power flow in the network by regulating the phase of line voltage. Dry-type transformers are solid-state devices comprising an air-filled, pressurised and sealed tank with core windings. In ester-filled transformers, natural esters are used as liquid insulation, as opposed to the mineral oils used in conventional transformers, providing them with fire-retardant properties. Converter transformers are deployed in HVDC projects to convert the generated electricity into DC and back to AC for power consumption. Flexible transformers can adapt to a range of voltage ratios and impedance levels, making them suitable for various applications by utilities. Coupling transformers are used in flexible AC transmission systems, enhancing control, stability and power transfer capabilities. Non-conventional (optical) instrument transformers (NCITs) are being adopted in substations due to their superior characteristics over conventional measuring transformers. However, the absence of digital energy meters is restricting the penetration of NCITs and, consequently, the implementation of digital substations.
Besides these, the industry is exploring alternative fluids for transformer oil, such as nano-doped oil and environmentally friendly fluids. The incorporation of nano-particles into transformer oil has the potential to improve various electrical and thermal properties, thereby improving the operational performance of transformers. In addition, biodegradable alternatives to transformer oil, such as natural esters, could be developed to make transmission systems environmentally friendly. Furthermore, the concept of an intelligent universal transformer has been designed to replace conventional transformers with a power electronic system that not only converts voltage, but can also manage and control consumer demand and power flows, and compensate for reactive power. It involves a state-of-the-art power electronic system and differs significantly from traditional transformer devices. Meanwhile, there has been a notable shift in operation and maintenance practices for transformers, with utilities increasingly focusing on reliability-centred maintenance and condition-based monitoring.
The way ahead
Constructing new transformer substations in inner-city zones or expanding existing facilities poses significant challenges due to limited space availability. As a result, there is an increasing demand for compact and discreet underground transformer substations in densely populated areas. Further, the power sector is exploring the adoption of transformer-less HVDC transmission systems. For wider acceptability and implementation, conducting pilot project studies is necessary to gain valuable experiences and insights. Despite these challenges, the outlook for the transformer market remains positive due to various growth drivers.