Why investors are excited about solid-state transformers

It’s no secret that the power grid is aging, but some parts stand out more than others. Transformers haven’t changed much since Thomas Edison created the first light bulb.

A series of startups is now working to replace transformers with modern power electronics, giving power grid operators more control over where and how electricity flows.

“This will be a very powerful device, on par with an Internet router,” Subbashish Bhattacharya, co-founder and CTO of DG Matrix, told TechCrunch.

Three startups recently raised significant funding to expand production of solid-state transformer technology. This week, DG Matrix raised $60 million in a Series A round and Heron Power raised $140 million in a Series B round. Amperesando raised $80 million in November to go after the fast-growing data center market.

Existing transformers are reliable and efficient, but that’s about it. These are relatively crude instruments made primarily of copper and iron. They passively react to changes on the grid and can only work on one task per device.

“Classic steel, copper, and oil transformers have no monitoring or control,” Heron Power founder and CEO Drew Baglino told TechCrunch. If your power surges or your power plant goes down, that could be your liability.

The device can incorporate power from a variety of sources, including traditional power plants, renewable energy, and batteries, and convert that electricity to alternating current (AC) or direct current (DC) at different voltages to replace multiple devices.

For data centers, solid-state transformers offer an attractive alternative, allowing greater control over where and how electricity is sent while reducing the footprint of the power system.

Solid-state transformers are poised to arrive during a classic technology supercycle, when existing transformers are aging and demand for new transformers is surging. According to the National Laboratory of the Rockies (NLR, formerly known as the National Renewable Energy Laboratory), most of the transformers on the power grid today are decades old. As demand from data centers, EV chargers, and other parts of the power grid increases, NLR expects the amount of power flowing through transformers to double by 2050.

Data centers are the first market these companies are going after, but they’re also eyeing the power grid, where there are 80 million transformers in the U.S. alone.

“Eventually all distribution transformers will need to be replaced. More than 50 percent of them are 35 years old. There is a huge need for updates,” Baglino said.

Made from silicone-based materials, it is flexible, controllable, and software updateable. It is also immune to the price fluctuations that rock the copper market.

“Power semiconductors continue to get cheaper. Steel, copper and oil, unfortunately, are not in that situation,” Baglino said. “Commodity prices can fluctuate everywhere and generally go up.”

In older style transformers, power flows into the transformer through copper wire wrapped around one side of an O-shaped core. When electricity flows, a magnetic field is induced within the core. On the other side of the core, a magnetic field induces electricity in another set of copper windings. If the core is wrapped with more wire on the input side than on the output side, the voltage on the output side will drop. When the ratio is reversed, the output voltage increases.

Solid-state transformers eschew copper windings in favor of semiconductors and use materials such as silicon carbide and gallium nitride to handle frequency conversion. There are many different configurations, and the most comprehensive consists of three basic parts: a rectifier to convert alternating current to direct current, a converter to change the voltage of the direct current, and an inverter to convert direct current back to alternating current.

Unlike iron-core transformers, solid-state transformers can handle power flowing in both directions, making them useful in data centers and other locations where backup power is required.

In data centers, solid-state transformers can replace several different pieces of equipment, as well as transformers that step down voltage from the grid. All data centers use backup power, so you need an array of devices to power your facility. A solid-state transformer can handle all these roles in one box.

This technology allows data centers to more easily integrate so-called behind-the-meter power, where generation capacity is connected directly to the data center rather than to the grid. These usually require a separate set of transformers.

Combining solid-state transformers with grid-scale batteries also eliminates the need for uninterruptible power supplies (UPS), freeing up space in the data center for more racks.

DG Matrix co-founder and CEO Haroon Inam told TechCrunch, “When you add up all the costs that we incur, 60% to 70% of those costs are borne by us.”

DG Matrix focuses on Interport technology that can power multiple loads at different voltages from multiple sources, and the company holds multiple patents for this setup.

Meanwhile, Heron Power works on converting medium-voltage power in data centers, solar farms, and grid-scale battery facilities. In data centers, Heron Link transformers can provide 30 seconds of power to a rack while a backup source is online. Overall, Heron Link takes up 70% less space than existing parts. In solar power plants, Heron Power’s transformers can perform the roles of inverter and transformer for the same price.

In direct comparison, solid-state transformers still command a higher cost premium than iron-core transformers. As such, the giant humming boxes in power grid substations are unlikely to be replaced in the near future.

However, solid-state transformers will begin to replace some equipment in data centers and EV charging hubs.

Ultimately, more power coming onto the grid could reduce transmission and distribution costs, one of the biggest drivers of utility bill inflation.

Because current transformers are passive and cannot react to fluctuations, the electrical grid is built with significant excess capacity, Bagrino said. However, solid-state transformers can respond to changing conditions, allowing grid operators to send more power through the same transmission line.

“You can actually make the infrastructure more affordable because you can deliver more kilowatt-hours on the same poles and wires,” he said. “That’s where intelligence can make a big difference, replacing passive mechanical objects designed 100 years ago.”