Positive Prospects: Transformer market trends and outlook

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.