Material Insights · Understanding the Material World

AC transmission and Transformers and power electronics

Every AC line begins and ends at a transformer, so transformer supply now limits how fast grids can grow: prices rose about 75% since 2019 and large units take up to four years, and India missed its 2025-26 substation target by about 10%.

AC transmission (energy) and Transformers and power electronics (energy): 5 relationships.

How they are linked

1. Step-down to distribution

Physical flow · Strong · AC transmission to transformers

All power on transmission lines passes through transformers at substations that step voltage down for distribution networks and large users.

  • 100% of AC transmission energy passing through transformers (site model)

Transformers are highly efficient, but they are at every node of the grid, so the number and size of substations grows with every new line.

Sources: Material Insights (Energy Institute, IEA data)

2. Step-up from generators

Physical flow · Strong · Transformers to AC transmission

Generators and solar or battery inverters connect through step-up transformers that raise voltage to transmission levels.

  • 95% of transformer and power electronics energy flowing to AC transmission (site model)

New solar, wind and battery plants each need inverters and a step-up transformer before they can use the grid, so connection queues depend on equipment supply as well as lines.

Sources: Material Insights (Energy Institute, IEA data)

3. Transformer bottleneck

Shared risk · Strong · Transformer shortage delays grid build

A few manufacturers make large power transformers, and demand from grid expansion and new renewable plants has outrun their capacity, so lines wait for equipment.

  • about 75% rise in power transformer prices since 2019
  • up to 4 years lead time for large power transformers
  • 113,013 MVA transformation capacity India added in FY2025-26, about 90% of the CEA target

The IEA reports lead times for cables and large transformers have almost doubled since 2021. India added 113,013 MVA against a 126,007 MVA target, with import-linked materials such as CRGO steel and copper among the constraints cited.

Sources: IEA; Outlook Business

4. Electrical steel for transformer cores

Physical flow · High in India · Transformers need CRGO steel

Transformer cores use cold rolled grain oriented (CRGO) steel, which few plants make, so its supply caps transformer output.

  • about 400,000 t India's CRGO demand, FY2023-24
  • about 50,000 t CRGO made in India, FY2023-24
  • about 239,000 t CRGO imported, FY2023-24

GTRI put the shortfall at about 30% of demand in FY2023-24 and blamed delayed BIS licence renewals for foreign suppliers under a quality control order.

Sources: The Week (PTI, GTRI report)

5. Price link: shared equipment

Cost and price · Strong · Both ways

Both nodes are priced with US transformer price indices that cover nearly the same products, so they move almost as one.

  • 0.91 monthly change correlation
  • 0.98 12-month change correlation
  • 1.03 fitted elasticity

Read this as one equipment market rather than two independent prices: the cost of building AC transmission is largely the cost of transformers and switchgear.

Sources: Material Insights (World Bank, FRED, IMF data)

For investors

Key learnings

  1. Transformer makers have pricing power: prices are up about 75% since 2019 and lead times reach four years.
  2. New solar, wind and battery plants cannot connect without transformers, so transformer supply paces generation build as well as grid build.
  3. In India, CRGO steel supply, mostly imported, limits how fast domestic transformer makers can grow.

What to track

  • Transformer order backlogs and lead times: Longer backlogs signal continued pricing power (Quarterly · manufacturer results (Hitachi Energy, Siemens Energy, CG Power))
  • India MVA transformation capacity added versus target: Shortfalls show equipment constraints (Monthly · CEA)
  • CRGO steel imports and prices: Tight CRGO supply raises transformer costs (Monthly · DGCIS, trade press)

For policymakers

Key learnings

  1. India met about 90% of its 2025-26 transformation capacity target, with CRGO steel and copper supply among the constraints cited, so equipment supply limits how fast renewables can connect.
  2. Domestic CRGO output covers only about an eighth of demand, so delays in licensing foreign suppliers under quality control rules feed directly into transformer shortages.
  3. Planning and ordering transformers early, and standardising designs, are practical ways to cut lead times.

What to track

  • Transmission and substation additions versus National Electricity Plan: Gaps delay renewable connections (Monthly · CEA)
  • BIS licences for CRGO suppliers: Delays restrict steel supply to transformer makers (As issued · BIS, Ministry of Steel)

India

India added 113,013 MVA of transformation capacity in 2025-26, about 90% of the CEA target, and imports most of the CRGO steel its transformer makers need.

Sources

  1. Building the Future Transmission Grid: executive summary, IEA (2025)
  2. India adds 113,013 MVA grid transformation capacity in FY26, meets 90% of CEA target, Outlook Business (2026)
  3. Transformer steel shortage could impact India's energy ambitions: GTRI, The Week (PTI, GTRI report) (2024)
  4. Energy flows, Material Insights, Material Insights (Energy Institute, IEA data)
  5. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)