Impact of Renewables on the European Distribution Transformer Market


In this article, we delve into the impact of wind and solar on the distribution transformer industry

by Azhar Fayyaz, Research Analyst – at Power Technology Research

  • Globally, installed base of wind and solar from 2015-2020 increased with a CAGR of 18% and 26% respectively.
  • In Europe, installed base of wind increased with a CAGR of 8% followed by solar which increased with a CAGR of 12%.
  • According to Power Technology Research installed base of renewables in Europe is expected to increase with a CAGR of 9.3% if it were to meet renewable energy targets set for 2030.
  • Gigawatt additions are expected to significantly impact and drive the growth of distribution transformers market in the future.

In pursuit of climate goals, economies across the globe are shifting from fossil fuels to renewable energy resources in order to meet their energy requirements. This, in turn, is driving the demand for distribution transformers. Globally, the installed generation capacity from wind and solar increased with a CAGR of 18% and 26% respectively between 2015-2020, while in Europe, the installed GW of wind and solar increased with a CAGR of 8% and 12%, respectively. (Table.1)

In this article, we delve into the impact of wind and solar on the distribution transformer industry in Europe as wind and solar constitute almost 50% of all renewables utilized globally. As far as Europe is concerned, the region is aggressively pursuing renewable energy targets and decommissioning conventional power plants unlike many other economies around the world where conventional power plants are still being commissioned.

Furthermore, renewables are usually connected at MV (medium voltage) levels to the grid, and thus the impact of renewables is more pronounced on distribution transformers as compared to power transformers.

 

Solar

Wind (On/Off-Shore)

Combined

Global

26%

18%

18%

Europe

12%

8%

10%

North America

28%

10%

15%

MEA

43%

15%

30%

APAC

35%

16%

24%

South America

53%

19%

26%

Table-1: Global and region wise CAGR in terms of the installed base from 2015-2020. Source: Power Technology Research

Generation

European economies, in order to meet both regional and international climate change commitments, have clearly set their renewable energy targets. In the realm of solar, Europe has set a target of a cumulative installed capacity of 447 GW by 2030 with major contributions coming from Germany (98 GW), France (40 GW), Italy (40 GW) and Spain (39 GW). Similarly, in the wind domain, the continent has set a target of 451 GW by 2030 with significant contributions coming from Germany (91 GW), UK (70 GW), Spain (50 GW), France (>40 GW), Italy (21 GW) and Netherlands (19 GW).

According to Power Technology Research, gigawatt additions from solar and wind generation have contributed 85% in France, 76% in Germany, and 74% to UK’s annual market of distribution transformers in 2020. This in turn not only suggests that renewable capacity additions significantly impact the distribution transformer markets of major European economies but quantifies their impact as well.

Utility

On the utility side of things, it is significant to note that the capacity of power plants dictate at which voltage level they will be connected as per the grid codes. Renewables are of comparatively smaller capacity as compared with

 conventional generation and, hence, are usually connected at the MV levels with the grid as mentioned earlier. This fact is driving the growth of distribution transformers in Europe. According to Power Technology Research, from 2017 till 2021, the installed base of distribution transformers in European utilities grew with a CAGR of 1.36% in terms of units.

Country

Generation Type

Category

Units

2030 Targets

France

Solar

Installed

GW

40

Germany

Solar

Installed

GW

98

Italy

Solar

Installed

GW

40

Netherlands

Solar

Installed

GW

27

Spain

Solar

Installed

GW

39

UK

Solar

Installed

GW

40

Europe

Solar

Installed

GW

447

France

Wind

Installed

GW

>40

Germany

Wind

Installed

GW

91

Italy

Wind

Installed

GW

21

Netherlands

Wind

Installed

GW

19

Spain

Wind

Installed

GW

50

UK

Wind

Installed

GW

70

Europe

Wind

Installed

GW

451

Table-2: Wind and solar energy targets in terms of installed capacity in Europe for 2030. Source: Power Technology Research

Digitalization of Transformers

Renewable capacity additions are not only driving the demand of distribution transformers but are also pushing for the digitalization of the grid. This involves the digitalization of transformers to deal with issues that arise with the grid integration of renewables including transient over voltages, harmonics, transformer saturation, power factor, reactive power, and voltage control.

As Europe is transitioning from an adequately stable grid environment to highly dynamic grid conditions with renewable integration, to increase the performance and stability of the grid, digital transformers will play a crucial role. In February 2021, Italian utility Enel announced that it will deploy the TXpert Ecosystem from Hitachi ABB Power Grids. These digital transformers will be equipped with state-of-the-art data driven capabilities to assess transformer ageing and offer real time analytics on transformer health. Additionally, the TXpert Ecosystem enhances grid reliability and service quality by enabling virtual site management of the resources as well.

Regions

CAGR

APAC

11.8%

MEA

21.5%

South America

13.7%

North America

3.9%

Europe

9.3%

Table-3: CAGR based on renewable energy targets of regions from 2020-2030 in terms of installed base. Source: Power Technology Research

Looking Ahead

Power Technology Research has observed that the installed base of renewables globally has increased significantly over the last five years owing to aggressive renewable targets set by economies across the globe to cater to global warming. For future years, according to Power Technology Research, the installed base of renewables in Europe is expected to increase with a CAGR of 9.3% in order to meet the renewable energy targets set for 2030 (Refer to figure 3). These gigawatt additions are expected to significantly impact and drive the growth of the distribution transformers market in the future. Power Technology Research further expects that with the continued penetration of renewables in the generation mix, adoption of digital technologies including digital transformers is expected to increase as well.

Author Bio

Azhar Fayyaz is a Market Analyst at Power Technology Research. He is involved in projects on the power grid topics at Power Technology Research gathering data on network structure of distribution utilities, estimating the installed base of T&D equipment, and analyzing the information to predict future market trends. As a market analyst at PTR, he performs competitive analysis of different companies operating in a region and determine their market share for a specific product. He also has more than 2 years of experience working as a senior shift engineer at Chashma Power Generation Station. Azhar comes from a technical background and has a M.Sc. in Power Engineering.

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