Solar developers are facing longer lead times for power transformers as manufacturing capacity for this key component in large-scale solar projects has failed to keep pace with demand, slowing solar deployment in India.

With approximately 143 GW of large-scale solar projects under various stages of development and another 96 GW of solar projects tendered and pending auction, the demand for transformers is exploding, according to the Q1 2024 India Solar Market Update from Mercom India Research.

The lead time for procuring 220 kV transformers has increased from 8-9 months to nearly 14 months, according to Ashish Agarwal, Head of Solar and Storage at BluePine Energy, a renewable energy developer.

“The rapid expansion of railways, metro systems, power transmission infrastructure, power projects, and solar projects has driven up the demand and pricing for transformers,” said Agarwal. “Additionally, many Indian engineering, procurement, and construction (EPC) contractors are undertaking projects overseas and utilizing the Indian supply chain, leading to increased exports of power transformers.”

Similarly, a spokesperson for Hartek Group, another EPC firm, told Mercom that they have also seen longer delivery times for power transformers, much like the rest of the industry.

“This is due to several reasons, including global supply chain hiccups, copper volatility, raw material shortages, and the booming demand for transformers driven by the rapid expansion of renewable energy projects,” the spokesperson said, adding that when it comes to Balance of System (BoS) components, power transformers often take the longest to deliver.

“While inverters, mounting structures, and electrical wiring usually have more predictable schedules, transformers are complex and take longer to manufacture. Their lead times sometimes stretch several weeks or even months longer than other BoS items.”

Transformers are essential components in electrical systems. They ensure the efficient transfer of electricity safely across long distances with minimal energy losses at stable voltage levels.

Electrical steel and copper are two crucial raw materials in a power transformer. Bushings, transformer oil, and insulation are other materials used.

According to a recent report by Wood Mackenzie, the lead time for procuring transformers has steadily risen over the past two years, ranging from 120 to 210 weeks globally. Transformer prices have risen 60% to 80% on average since January 2020, driven by higher copper prices, which have increased more than 40% over the same period.

The research firm estimates that 25% of global renewable projects are at risk of delays due to transformer lead times.

This bottleneck in transformer availability is expected to have ripple effects across India’s infrastructure buildout, potentially delaying the timelines for solar project construction and other energy projects.

At the same time, transformer manufacturers are also grappling with a surge in orders.

“The primary reason for extended delivery times globally is the high demand coupled with limited availability of specific components like bushings and sensors,” a spokesperson from Shirdi Sai Electricals (SSEL), a transformer manufacturer, said. The scarcity is largely due to the execution time required by manufacturers for these specialized components, which remain limited worldwide.

The company said this has stretched the delivery time frame to nearly three years in the U.S. and over a year in India. While SSEL claims its lead times of 10-12 months for power transformers and 3-4 months for distribution transformers are manageable, the firm called for government intervention to ease import policies for key raw materials that are in shortage in India. Indian transformer industries are operating at only 60% to 70% of their capacity.

“Furthermore, meeting short circuit criteria, as outlined by the Central Electricity Authority of India’s (CEA) guidelines, presents a challenge due to the diverse range of ratings and voltage classes selected by developers to optimize the overall costs. Although CEA has expanded its guidelines to accommodate these requirements, many solar developers insist on strict compliance, reducing the pool of available suppliers and exacerbating demand and lead times,” the company said.

Faced with this mounting demand, some transformer manufacturers have expanded their production capacity or announced plans to meet the growing market requirements.

Transformers and Rectifiers India, a manufacturer of a wide range of transformers, in a recent earnings call, said that it plans to use a part of the ₹5 billion (~$60 million) it raised to expand capacity. Additionally, the company is also trying to reduce the time it takes to make a transformer since it’s challenging to increase capacity quickly. “We are putting all our efforts into reducing the cycle time… we have successfully reduced the cycle time down from 55 days to 40 days. So, now we are trying to reduce it further down to 32 days, or 35 days,” said Jitendra Mamtora, Chairman of Transformers and Rectifiers India. The company noted that 60% to 70% of their transformer order book is for renewable energy projects, especially solar ones.

“We are mainly focusing on green hydrogen transformers and for solar parks transformers… the demand is going to be very high… 80 to 100 transformers per month,” added Mamtora.

Hitachi Energy, a subsidiary of Japan-based conglomerate Hitachi, recently said it will ramp up its global manufacturing capacity for transformers with a $1.5 billion investment by 2027, as a long queue for grid interconnections, particularly from renewables, is driving up demand.

Expanding production also presents challenges. SSEL claims that the industry has always experienced an up-and-down pattern in the demand for transformers. During periods of high demand, many manufacturers have expanded their capacities, only for the demand to decrease. Consequently, manufacturers tend to exercise caution due to this inherent unpredictability.

As India aims to install 450 GW of renewable energy by financial year 2031-32 under its climate commitments, ensuring a steady supply of transformers and other balance-of-system components will be crucial for timely project execution across the solar, wind, and energy storage sectors.