United States Distribution Transformer Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

United States Distribution Transformer Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The United States distribution transformer market is expected to reach USD 3.72 billion by the end of this year and is projected to register a CAGR of over 3.75% during the forecast period.

The COVID-19 pandemic negatively impacted the power industry. However, the market is expected to grow at a steady pace during the forecast period.

Key Highlights

• Over the medium term, investments and efforts to modernize the T&D grid are expected to drive the growth of the market studied.
• On the other hand, rising distributed energy generation is expected to hamper the growth of residential batteries during the forecast period.
• Nevertheless, the commercialization of solid-state distribution transformers is likely to create lucrative growth opportunities for the global residential battery market in the forecast period.

Key Market TrendsOil-Filled Segment Expected to Dominate the Market

• A dielectric oil is used in oil-filled transformers to insulate and cool transformer windings. The oil used in distribution transformers is highly refined transformer oil. The primary application of this oil is to isolate the transformer's mechanical components. Oil-filled transformers are also known as fluid immersed transformers. Most of these transformers are typical step-down types, as they transform high voltage to lower voltages. ​
• Oil-filled power transformers are designed to handle larger loads. Thus, they are used in applications that require higher voltages. Furthermore, an oil-filled transformer could play a vital role if the installation site has a relatively hot and humid environment. Typical applications of oil-filled distribution transformers are at locations where high-power voltages transform before entering consumer lines, also known as a service drop point. These transformers are also employed for remote areas outside the city, particularly for farmhouses, households in rural or remote areas, remote settlements, and pumping stations. Oil-filled distribution transformers also have application in railway supply for AC. For railway applications, mostly single-phase transformers are used. In urban areas, multiple households can benefit from a single transformer. ​
• Furthermore, oil-filled transformers are efficient and can bear higher loads and are used for large-scale operations. Factories with huge spaces mostly use an oil-filled transformer to handle the amount of work and power according to the factory's needs. Furthermore, industrial complexes have several distribution points to power multiple sections of operations, which may have different ratings depending on the machinery's needs. Thus, more than one oil-filled distribution transformer may be required. Large buildings may own a distribution transformer connected directly to the main distribution line.​
• Oil-filled transformers are also an integral part of renewable energy networks. They are used in solar, wind farms, and hydro plants applications. For instance, distribution transformers are essential components in solar PV plants. When the solar PV is connected to the grid network with the help of distribution transformers, electricity is directly injected into the grid. ​
• Thus, companies invest more in oil-filled distribution transformers. For instance, Hitachi Energy Ltd announced on May 26, 2022, that it would invest more than USD 10 million in its distribution transformer facility in Jefferson City, Missouri, the United states. The company will invest in the expansion and modernization of the facility, providing additional capacity and enhancing its manufacturing capabilities. The factory produces liquid-filled pad-mount and submersible distribution transformers for the electric grid, commercial buildings, and industrial facilities.​
• With all these advantages, coupled with increased investments, the oil-filled segment is anticipated to dominate the market during forecast period. ​

Increasing Investments and Efforts to Modernize Country's Grid expected to Drive the Market

• As of 2021, the United States was the second-largest energy consumer globally, and consequently, has one of the largest Transmission and Distribution (T&D) networks in the world. Distribution transformers are one of the most critical assets in the electricity T&D network, used to step down power voltages to supply electricity to consumers. Hence, distribution transformers are fundamental for the efficient distribution of electricity across the bulk-power system of the United States, which supplies electricity to residential, commercial, and industrial customers, as well as the power required to support military and defense installations, including bases, arsenals, and laboratories.​
• However, the country’s grid infrastructure is relatively old, and the current generation of T&D systems installed in the United States is aging. Most of them have been operating for more than 25 years, making them unsuitable for renewable energy integration and accommodating EV charging systems. To improve the reliability of supply, these distribution transformers need to be replaced/upgraded with smart systems and technology-enabled distribution transformers.​
• Additionally, due to this rapid rise in renewable generation, grid stability has become a major issue in countries with a high level of renewable integration in their grids. Nearly 66% of the installed renewable energy capacity in the United States is from wind and solar, which are inherently variable sources of energy. Due to variable power output, traditional T&D systems are not suitable for renewable energy transmission and distribution and require upgradation or retrofitting with smart grid technologies, including advanced, smart systems suitable for interaction with renewable energies and ICT.​
• The US Government identified the problem and outlined a strategy for modernizing the country’s grid system. In April 2021, the US government launched a federal program named Building a Better Grid Initiative, under the Department of Energy (DOE), to expand and modernize the country’s electricity grids. Under this program, the DOE introduced new financial packages and tools to help build high-voltage electric transmission lines. The program also identifies 20 major T&D projects which are currently in the pipeline or under construction, and the DOE is expected to collaborate with the Department of Transportation to secure existing rights-of-way to facilitate the siting of transmission lines.​
• Under this program, in May 2022, the DOE issued a Request for Information (RFI) seeking public input on the structure and allocations made under the USD 2.5 billion Transmission Facilitation Program (TFP). According to the DOE, this is expected to be the first installment of a USD 20 billion package under the Building a Better Grid Initiative. The program will provide federal financial support for large-scale T&D projects.​
• Under the TFP, the DOE is authorized to secure a loan of up to USD 2.5 billion to assist the construction of new and upgraded high-capacity transmission lines through three financing tools: loans from DOE; DOE participation in public-private partnerships; and capacity contracts with eligible projects in which DOE would serve as an anchor customer. The DOE is also legally obliged to purchase up to 50% of the maximum capacity of the transmission line for up to 40 years.​
• Based on the above instances, it can be easily deduced that the country’s T&D network is undergoing huge changes, and heavy investments are pouring into the sector. Investments are coming in from both the private and public sectors, and government investments are coming in from both the state and federal levels. Such large investments are expected to improve the country’s grid, which is expected to be a major factor driving the demand for distribution transformers in the country during the forecast period.​

Competitive Landscape

The United States distribution transformer market is fragmented. Some of the key players in this market (in no particular order) include Siemens AG, Hitachi Energy Ltd, General Electric Company, Schneider Electric SE, and Emerson Electric Co.

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