Andreas Schierenbeck, chief executive of Hitachi Energy, has warned that the transformer sector is “overwhelmed” and can no longer meet the demand for grid equipment required for crucial infrastructure projects worldwide.
Schierenbeck argues that transformer manufacturers will struggle to boost the output required to upgrade grid infrastructure due to the growing need for data centers.
Demand within the transformer market has skyrocketed, and according to estimates by Rystad Energy, the sector is expected to grow from $48 billion today to $67bn in 2030.
As a result, the often short lead times for transformers, which stood at six to eight months before the rise in demand, have grown significantly.
In April, Wood Mackenzie warned that transformer lead times now average 115 to 130 weeks. According to Schierenbeck, this is only expected to increase, stating that utilities who want to buy a transformer will likely have to wait up to four years if they haven't already secured a reservation.
“Ramping up capacity is an issue. It’s not easy, and it will probably not ramp up fast enough,” Schierenbeck told the Financial Times.
Bottlenecks in the supply chain have compounded this issue even further, with the growth of renewable energy mix in specific markets necessitating more transmission infrastructure due to the remote nature of some of the projects.
Demand for step-up transformers, essential for wind and solar generation, has grown exponentially. As a result, Wood Mackenzie has warned that “based on conversations with developers and suppliers, as much as 25 percent of global renewable projects could be at risk of project delays due to transformer lead times."
To meet the soaring demand, Hitachi has committed to investing $6 billion and hiring 15,000 more people to expand its production capacity over the next three years.
Schierenbeck tempered concerns that Chinese manufacturers would become a threat, arguing that: “the Chinese were not exporting because it’s built for their purposes.”
However, with transformer prices rising 60-80 percent on average since 2020 and the US only able to meet 20 percent of transformer demand, the Chinese market will likely carve a growing share of the transformer sector in the coming years. According to market research group Grand View Research, the Chinese transformer market is expected to almost double from $3.7 billion in 2022 to $6.5bn in 2030.
Despite concerns, there has been a renewed push within the US market to meet the surging demand. In November, Power and Data Management announced the opening of its North American manufacturing location in Salt Lake City, Utah.
The expansion is expected to address the ongoing transformer shortage and circuit breaker demand in the US by giving data centers, utilities, and enterprise companies industrial-grade products manufactured in the USA with US and imported parts.
