A cluster of well-funded startups is attempting to modernise one of the oldest components of the electricity system, replacing passive iron-core transformers with software-driven power electronics designed for an AI and electrification era.
Why The Timing Matters
Transformers have changed little in principle for more than a century. Built from copper windings and steel cores, they step voltage up or down and operate reliably for decades. What they do not offer is active control.
That limitation is becoming more visible as electricity demand accelerates. AI data centres, electric vehicle charging networks and distributed renewable generation are increasing loads on ageing infrastructure. Industry estimates suggest that more than half of distribution transformers in service are over 35 years old, while total power flowing through them is expected to rise sharply over the coming decades.
At the same time, transformer supply chains are under strain. Lead times have stretched, delaying grid upgrades and major industrial projects. Electrification is moving quickly. Core grid hardware is not.
From Passive Hardware To Power Electronics
Solid-state transformers replace traditional magnetic cores with high-frequency power semiconductors such as silicon carbide or gallium nitride. Instead of simply stepping voltage up or down, they integrate rectification, conversion and inversion into a programmable system.
The result is a device that can manage alternating and direct current, handle bidirectional flows and adjust dynamically to changing grid conditions. In practical terms, that means tighter voltage control, smoother integration of solar and batteries, and the ability to route power between multiple sources and loads in real time.
Unlike conventional transformers, which respond passively to disturbances, power-electronic systems can actively stabilise output and support ride-through during faults.
Investment
Investors are backing the thesis that the transformer is overdue for reinvention. For example, Heron Power, based in Santa Cruz, California, has raised $140 million to scale production of its solid-state systems. North Carolina-based DG Matrix has secured $60 million to advance its multi-port Interport platform. Amperesand, also in the US and focused on next-generation power architecture for data centres, has raised $80 million targeting data centre deployments.
The early focus is data centres, where space constraints, high power density and the need for rapid deployment create strong incentives to consolidate equipment. Solid-state platforms can combine the functions of transformers, inverters and certain backup systems into a single modular unit, reducing footprint and simplifying architecture.
Heron Power says its medium-voltage systems are designed to deliver efficiency above 98 percent in data centre and renewable applications, with materially smaller footprints compared to traditional assemblies.
Implications For Utilities And Renewable Projects
For utilities, the appeal lies in flexibility. Networks built around passive components require significant spare capacity to cope with fluctuations. More intelligent transformer systems could allow operators to push more power through existing lines while maintaining stability.
For renewable developers, integrating inverter and transformer functionality can simplify plant design and potentially shorten interconnection timelines. Projects combining solar, storage and grid support services may benefit from more modular, software-configurable infrastructure.
These capabilities are particularly relevant as grids absorb higher proportions of intermittent generation and distributed energy resources.
What Does This Mean For Your Organisation?
For UK businesses pursuing electrification, on-site generation or high-density computing, the evolution of transformer technology could reshape project economics. Faster connections, smarter load management and more adaptable behind-the-meter systems may reduce both risk and delay.
Yet challenges remain. Solid-state transformers still carry a cost premium in many use cases. Utilities and regulators are cautious by design, and new hardware must prove long-term reliability under demanding conditions. Scaling manufacturing to meaningful global volumes will also take time.
What is clear is that a traditionally static component of the grid is becoming a point of innovation. As sustainability targets tighten and electricity demand climbs, the transformer is shifting from a passive box on the edge of the network to an intelligent, software-defined asset at the centre of it.