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Impact of Energy Transition on the Transformer Market

Transformers are essential components of modernization. It is estimated that by 2030 and beyond, billions of dollars annually will be allocated for grid infrastructure, including transformers.

Governments worldwide, especially those of developed economies, are taking action to reduce greenhouse gas (GHG) emissions to mitigate the impacts of climate change. The power sector is a major contributor to GHG emissions, which is why countries are shifting towards renewable energy sources, as they produce clean electricity. Therefore, by 2026, renewable energy is expected to constitute nearly 95% of global electricity capacity growth. Similarly, there is anticipated growth in demand for electric vehicles (EVs) at a rate of 23% annually over the next decade.

The rapid promotion of renewable energy and EVs brings about some challenges. One of the main challenges currently faced is whether existing grid infrastructure can accommodate these modern technologies. Additional capacity requirements necessitate grid upgrades, paving the way for modernized electricity development, which increases the demand for traditional grid equipment, including transformers.

Over the years, global policies surrounding climate and energy have evolved, encompassing regions such as the European Union, the United States, the Middle East, and Central Asia. For instance, in the European Union, the European Commission has adopted a series of proposals to align the region's climate, energy, transport, and taxation policies to reduce GHG emissions by at least 55% compared to 1990 levels by 2030.

Similarly, the United States has implemented a federal sustainable development plan with several objectives consistent with President Biden's goal of reducing GHG emissions by 50%-52% from 2005 levels by 2030. Additionally, around 32 countries in the Middle East and Central Asia under the Paris Agreement have committed to reducing their GHG emissions from 21% to 13%. However, only 13% of emissions reductions are unconditional, while 21% are contingent on the availability of external support.

According to data from the International Energy Agency (IEA), global renewable electricity capacity is expected to increase by nearly 2400 GW from 2022 to 2027. As renewable energy's share in electricity capacity portfolios increases, there is a need to replace traditional transformers with digital transformers, as traditional transformers cannot provide the required security, productivity, and reliability in the grid.

In recent years, various innovative technological solutions have emerged, including the Internet of Things (IoT), digital twins, and smart metering technologies, which are currently commercialized in global markets. When used with transformers, these technological solutions aid in transitioning from fossil fuels to clean energy. For example, IoT sensors can be installed on power transformers to collect real-time information on temperature, vibration, and oil levels. This data helps in proactive maintenance planning, thereby reducing operational and maintenance costs over the lifespan of grid equipment.

On the other hand, digital twin solutions tailored for transformers are an emerging technology. When used with transformers, digital twins can simulate various operational scenarios. These simulations enable utilities to optimize transformer performance. Additionally, smart meters can collect energy consumption and demand data, which, when used in conjunction with distribution transformers, help in dividing distribution areas into smaller, geographically manageable blocks.

The energy transition is inevitable and will fundamentally alter traditional grid equipment's design, including power and distribution transformers. The future global transformer market is expected to be primarily driven by smart transformers, which is also why equipment manufacturers continuously attempt to innovate and provide new products and solutions to meet the ever-changing demands of the grid.


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