Data Center Distribution Transformer Market: Optimizing Energy-Efficient Data Centers


As the world becomes increasingly digitalized, data transmission networks, as well as data centers, are evolving as a critical source of energy demand. Similarly, smoother power distribution across data centers via transformers helps maintain the efficacy and safety of electrical systems by controlling the voltage at desired levels. Inkwood Research estimates that the global data center distribution transformer market is evaluated to grow with a CAGR of 6.32% during the forecast period of 2023 to 2032, capturing a revenue share of $11748.13 million by 2032.

According to the Office of Energy Efficiency & Renewable Energy, data centers are some of the most energy-intensive buildings, absorbing up to 50 times the energy per floor space of an archetypal commercial office structure. Furthermore, data transmission networks, as well as data centers, are accredited to approximately 1% of energy-related greenhouse gas (GHG) emissions. (Source: International Energy Agency).

Since high energy consumption continues to remain a key issue, organizations are increasingly moving toward energy-efficient systems in order to manage as well as reduce power usage in data centers.

Aligning with this, here are the top 4 ways in which data centers can be better optimized, especially in terms of maximizing energy efficiency.

  • Effective Site-Selection: When assessing potential locations for a new data center, there are a number of considerations to prioritize in order to maximize energy efficiency. These include –
    • Power Costs & Reliability – Since data centers are characterized by significant energy requirements and subsequent high-power costs, building a data center close to major power sources, such as wind farms, hydroelectric dams, or power plants, is vital. Moreover, this can also help minimize initial construction costs while reducing problems associated with energy transmission in the future.
    • Natural Disaster Risks – Natural disasters have continued to be one of the greatest potential downtime risks faced by data centers; 48% of outages cost organizations between $100,000 and $1M. Hence, it is essential that data centers are located in areas with minimized susceptibility to earthquakes, floods, hurricanes, or other natural disasters to curtail costs and increase energy efficiency.
  • Incorporating Renewable Energy: Solar and wind energy are among the most widely utilized sources of renewable energy by cloud providers. Renewable energy sources can either be exclusively owned and managed by individual cloud vendors or obtained via contracts with renewable energy providers.
  • For instance, Kao Data (United Kingdom) is presently powered by 100% renewable energy across holistic data center operations. Moreover, the green energy pioneer was the first European data center to switch its backup generators to 100% renewable HVO biofuel.
  • Likewise, Digital Realty (United States), in June 2022, became the first data center operator across the globe to reach 1GW of sustainable IT capacity. It also achieved 64% renewable energy coverage worldwide, indicating a 14% increase in one year.
  • Improving Transformer Proficiencies: In data centers, where aging electrical distribution components are approaching the end of their expected lifespan, installing high-efficiency transformers in place of standard-efficiency units presents an opportunity for notable energy savings. For example –
    • Hitachi Energy (Switzerland) successfully developed and installed a dry-type transformer with the potential to endure 100 kV / 550kV Basic Impulse Level (BIL). This innovation has paved the way for using sustainable and environment-friendly transformer technology at even sub-transmission levels. Accordingly, the dry-type segment, under the insulation category, is set to grow with a CAGR of 5.90% between 2023 to 2032.
    • Fluid-immersed distribution transformers by Siemens AG (Germany) are designed for superior reliability, efficiency, and environmental performance. Moreover, a modular architecture paired with design options ensures cost- and energy-efficiency as well as easy, minimal maintenance. Aligning with this, oil-immersed is projected to be the fastest-growing insulation, capturing a CAGR of 6.43% between 2023 to 2032.
  • Energy Usage Monitoring Equipment: Installing energy monitoring components and systems to quantify a data center’s energy efficiency is crucial for the effective implementation of energy conservation measures. For example –
    • EconiQ™ Power and Distribution Transformers by Hitachi ABB Powergrids offers transparency on environmental impact via scientific methodologies followed by best-in-class solutions. This helps improve sustainability performance – contributing to decarbonization, protecting surrounding ecosystems, and facilitating responsible use of resources.
    • Likewise, in 2021, Hitachi ABB Powergrids introduced an upgrade to TXpert Ecosystem, set to offer remote monitoring services for transformer fleets. The range of options provided in this upgrade includes remote monitoring, consulting, troubleshooting, and the use of augmented reality (AR) to provide guidance.
    • With the adoption of cloud computing, several companies are inclined toward reducing the size of their server rooms and saving energy costs. In this regard, MiniCube by Legrand SA (France) is a reliable and efficient solution, entailing the components required for a full data center: monitoring, housing, power supply, and cooling, within a compact system.
    • Eaton (Ireland) developed a smart vacuum fault interrupter (VFI) transformer, which utilizes microprocessor-based control schemes supporting various functions. These include fault event recording, data exporting, extensive monitoring, and directional protection.

Investments in Smart Technologies: Stepping up ‘Smarter’ Data Center Distribution Transformers

Smart transformers are equipped with intelligent monitoring systems as well as diagnostic features, which provide faster response to energy fluctuations, while permitting the desired levels of power accurately. In the event of a power fluctuation, smart transformers can also be remotely controlled and monitored in order to optimize voltage levels. The advent of smart transformers and the benefits associated with these transformers have encouraged manufacturers to invest aggressively in the development of smart solutions.

Accordingly, in May 2022, Hitachi Energy announced plans to invest around $10 million in the modernization and expansion of its distribution transformer facility in Missouri. The investment aims to grant additional capacity while improving its manufacturing capabilities. Moreover, it also underscores the swift growth in demand from utilities, especially with regard to novel applications such as solar and wind power generation, data centers, and battery energy storage. Hence, investments by leading companies operating in the global data center distribution transformer market are set to enable lucrative expansion opportunities during the forecast period.

By Shruti Vanjare


What contributes to data centers’ significant energy consumption?

Data centers are characterized as complex environments with the primary purpose of story information technology (IT) equipment. Within these, the chief driver of significant energy consumption is the IT equipment itself.

What are some challenges faced by the global data center distribution transformer market?

The high risk of data center security and high installation costs are among the key factors hindering the growth of the global data center distribution transformer market.