The global distribution transformers market for national electricity grids is expected to grow at a compound annual growth rate of 1.6%, to reach $14.33 billion in 2022, according to a recently released report by GlobalData.

Smart grid and global trends

Market initiatives undertaken to support economic progress, address environmental challenges, sustain the growing demand for electricity and improve quality standards are expected to drive the distribution transformers market, the 153-page report by the data and analytics company found.

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The report also found that globally a number of changes are taking place due to climate change issues, failing technology prices, reliability challenges and the widespread use of electricity in other sectors.

These changes are taking place against a backdrop of governments working towards creating favourable market conditions for improving electrification rates and grid expansion while supporting the power sector transition.

Electricity consumption and economic growth are strongly connected, with secure and sustained electricity supply underscoring strong business performance at the nation-state level.

Increased market activity within countries in South East Asia and the Middle East and Africa are contributing to the demand for distribution transformers in their respective regional markets, the report found.

Technology changes, growing demand for electricity, emission concerns and supportive policies are spurring grid development projects.

Gradual diversification of energy mix

Globally, nation states are showing a trend towards gradually diversifying their power mix, with renewables playing an important role in the final energy mix; in particular distributed generation technologies such as solar, battery electric vehicles, which would ultimately result in non-linear power flow at the distribution/low voltage level.

These changes can be expected to require distribution transformers capable of handling two-way power flows. The growing role of renewables for power generation is also expected to incorporate grid assets that provide flexibility without compromising reliability, according to the report.

Market for distribution transformers: region and aggregate market value ($ billion), 2013–2017 and 2018–2022

Source: GlobalData, 2018

GlobalData’s report finds that the global market is expected to slow down in the forecast period, with major nations moving towards a replacement market rather than new deployment.

Asia-Pacific to lead the market

The Asia-Pacific is estimated to reach $6.9bn in 2022; accounting for 48% of the global market value. Europe, the Middle East and Africa, and the Americas are likely to account for 26% each of the market value, respectively.

The Asia-Pacific is expected to continue to lead the market, with grid expansion and upgrades carried out, in order to meet the growing demand for electricity and the increasing adoption of renewables.

China and India, rising powers

China and India are greatly influencing the market with their robust economies, increasing population, drive to become global manufacturing hubs and leaders in their respective markets.

The Asia-Pacific market was valued at $7.1 billion in 2017 and grew at a compound annual growth rate of 9.6% during the historical period (2013–2017). Over the forecast period, other emerging countries with development objectives are expected to help sustain the market growth at a compound annual growth rate of 0.8%.

China is the largest market for distribution transformers and will continue to do so over the forecast period. Reviving its industrial sector, ramping up electrification, and large-scale deployment of generating capacity contributed to China becoming the largest power market in the world.

However, the development pace of large generation capacities was far greater than that of power transmission and distribution capacity development; which resulted in severe economic losses due to curtailment and grid congestion.

The Chinese government in its recent development plans proposed significant investments made towards addressing the deficit in grid capacities. The strong industrial base and rural electrification objective would drive the market over the forecast period, which is expected to reach $3.83 billion in 2022.

The US is the second largest market

The US is estimated to be the second largest market for distribution transformers holding 18.3% of the market value in 2022. The US were early pioneers of the electric grid but it is now showing signs of ageing and in need of replacement in some instances. Also, policy development and a strong research base have contributed to the proliferation of renewable and other distributed generation technologies across the grid.

The momentum gathered by renewable energy deployment along with the digital transformation of the distribution network commenced by electric utilities indicates a significant market potential for smart distribution transformers. The market is expected to grow at a compound annual growth rate of 2% to reach a market value of $2.6 billion in 2022.