By Farah Saeed
Power distribution equipment might not be considered the most exciting or revolutionary technology. Nevertheless, the systems are considered highly critical and require careful selection to avoid a compromise of electricity delivery.
Among the two key devices that bear the share of revenues in this market are medium voltage distribution transformers and switchgear. Frost & Sullivan estimates annual sales for distribution medium voltage transformers for utilities are more than $1 billion, accounting for more than half of annual sales, whereas switchgear annual sales are some $250 million.
Because of the technology's maturity, many key vendors view distribution transformers as a venue to promote higher valued goods and services, including complete construction project management of substations and related back-end operations. But, the market has also seen a need for product enhancements in the form of providing compact sizes, improving energy efficiency, using environmentally friendly materials and improving the assembling of the overall system. Some of the key trends are as follows.
Vendors have actively distinguished themselves through these product enhancements. The industry is motivated to improve technology to address opportunities derived from an aging grid while fulfilling requirements to improve energy efficiency to help conserve energy. Frost & Sullivan research indicates sales peaked between 2010 and 2012 because of a combination of pent up demand following the 2009 recession and the launch of new energy standards. Most notable examples include the Department of Energy (DOE) requirements for energy conservation standards for liquid-immersed and medium voltage dry-type transformers that went into effect in 2010. A new set of energy efficiency standards are expected in 2016, which are projected to spur another replacement cycle. These new standards are also expected to impact prices as vendors look to change the conductor design and add more conductor material to improve the transformer's energy efficiency.
The long transformer life cycle has also created a market for after sales services aimed at maintenance, monitoring and repair of the product such as predictive diagnostic services, which offer transformer insulation monitoring systems that target medium voltage circuit breakers and cables.
In connection with smart grid, the industry has also been infused with smarter systems that are tied with asset management. An example includes transformer monitor solutions that feature meter technology along with data collector and visualization applications. These systems are installed on pole mounted transformers and provide information on transformers that are overloaded as well as the current lifespan of the product. Through this, utilities are hoping to have a better visual of their system for repair purposes, which can be used to shorten the duration of power interruptions. Elster is said to have installed 5,600 transformer monitors since 2009. The concern of addressing possible transformer failure has recently been elevated by the anticipation of electric vehicle charging and the transformer's ability to handle excess load.
Other technologies that monitor transformer health include dissolved gas analysis (DGA) of the transformer oil, which involves taking a sample of the insulation material for testing the oil quality and product lifespan. There is also the possibility for the commercialization of solid-state transformers with enhanced sensors and embedded monitoring. When that happens, it could cause a market disruption for conventional transformers. According to economists and pundits, some market uncertainty might dictate sales in the near term. Given the scenario of product development, however, the market for power distribution equipment is far from stalling in the long run.
About the author: Farah Saeed is principal consultant for Frost & Sullivan.