[Power Industry Transformation]③Power Equipment Emerges as Key Export Driver... Half of US Distribution Transformers Are Aging

Large and Medium Transformer Exports Surpass USD 1 Billion
Korea Seizes Opportunities Amid Expanding Global Replacement Demand

As of October this year, exports of large transformers surpassed 1 billion dollars (approximately 1.47 trillion won). This figure exceeded last year's annual export total by two months, highlighting the emergence of Korea's electric power equipment industry as a key export driver. Annual exports of large transformer products exceeding 1 billion dollars have not been seen in 14 years, since 2010. This trend is attributed to the steady increase in demand for high-capacity transformers, driven by the expansion of global power transmission networks and the rise in power generation and substation projects.

According to statistics from the Korea International Trade Association on the 25th, exports of large transformers with a capacity exceeding 10,000 kVA (10 MVA) reached 1.04088 billion dollars between January and October this year. This already surpasses last year's annual export total of 946.25 million dollars. While the weight of exported large transformers only increased by about 4%, the export value grew by more than 30%. This is attributed to the rising share of high-voltage, high-capacity products and the upward adjustment of overseas project unit prices.

Notably, the share of exports to the United States has grown rapidly. The proportion of large transformer exports to the United States increased from 28% in 2022 to 38% in 2023, and to 43% in 2024, expanding every year. As of October this year, it exceeded 60%. In terms of weight, the share also rose from 22% in 2022 to 30%, 36%, and 53% over the same period. This surge is interpreted as a result of the growing orders for Korean ultra-high voltage transformers, driven by efforts to resolve transmission grid bottlenecks and the accumulated demand for large-scale power equipment replacement in the US.

Exports of medium and small distribution transformers are also on the rise, not just large units. As of October this year, exports of transformers in the 650 to 10,000 kVA range reached 550.4 million dollars, a 48% increase compared to the same period last year, while products with a capacity of 650 kVA or less maintained a level of around 300 million dollars. Although there are differences in growth rates by product category, the overall distribution transformer market has been expanding since 2022. This is attributed to the steady demand for low- and medium-voltage transformers, resulting from the replacement of industrial equipment, expansion of power capacity for buildings and factories, and the installation of equipment linked to renewable energy sources.

Total transformer exports are estimated at around 1.8 to 1.9 billion dollars as of October this year. In addition to the United States, new power plants and substations are being built in Southeast Asia and the Middle East. Indonesia has announced plans to invest approximately 183 billion dollars from 2025 to 2034 to expand 69.5 GW of power generation facilities and transmission and distribution networks. Vietnam, the Philippines, and other countries are also building new substations and strengthening distribution networks in line with the expansion of distributed generation. An industry official said, "While demand for large transformers remains strong, there is also increasing need for distribution automation and DC power conversion equipment, which could accelerate future growth. As the complexity of distribution network operations increases, related investments are expected to continue."

It is not only artificial intelligence (AI) data centers that have driven the surge in demand for electric power equipment. The aging of power grids in the United States and Europe is also playing a significant role in stimulating replacement demand. The need to replace transformers is particularly pronounced in the United States. According to a report by the National Renewable Energy Laboratory (NREL) under the US Department of Energy (DOE), about 55% of distribution transformers currently in operation are outdated, having been in service for over 33 years. These aging facilities are less efficient and pose a higher risk of accidents, making it likely that replacement demand will occur simultaneously.

However, the US manufacturing capacity for electric power equipment is insufficient, leaving the country dependent on imports. Market research firm Wood Mackenzie predicts that in 2025, the supply of transformers in the United States will fall short of demand by 30% for power transformers and 10% for distribution transformers. A domestic power industry official stated, "By meeting US customers' requirements for timely supply of equipment capable of stably handling large-capacity power, we will strengthen our position in the US market."

The industry anticipates that the US transformer market will grow at an average annual rate of about 7.7%, increasing from approximately 12.2 billion dollars (about 17.8 trillion won) in 2024 to around 25.7 billion dollars in 2033.

US power operators have confirmed new data center power supply projects totaling 116 GW, which accounts for about 15.5% of total electricity demand (approximately 750 GW), and are planning to further expand power supply by an additional 309 GW by 2040. NREL forecasts that US data center power demand could more than double by 2030. This means that the period during which transformer replacement demand overlaps with new demand could last at least five years.

Replacement demand for aging grids is also accelerating in Europe. In its recently released energy network outlook, the European Union (EU) projected that a total investment of 1.2 trillion euros would be needed by 2040, including 477 billion euros (about 820 trillion won) for transmission networks and 730 billion euros for distribution networks. Given that the average service life of transmission networks in major European countries is 40 to 50 years, demand for transformer and cable replacement is likely to continue for an extended period.

The increase in global demand is also creating new opportunities for Korea's electric power equipment industry. Korean companies, known for their strength in manufacturing high-efficiency, high-durability transformers, have recently seen rapid expansion in orders from North America and Europe. The market share of domestic companies in the North American ultra-high voltage transformer market has reportedly risen to 25%.

Jeon Bohee, Research Fellow at the Korea International Trade Association's Institute for International Trade and Commerce, said, "Except for semiconductors and ships, most of Korea's export items are not performing well, but transformers are showing exceptionally strong momentum. Looking ahead, the outlook is bright as demand for replacing aging transformers in the US overlaps with new demand."

This content was produced with the assistance of AI translation services.