Investors are zeroing in on solid-state transformers, betting that power electronics will redefine how electricity is moved and managed. In quick succession, startups building the technology have announced sizable rounds, including a $60 million Series A for DG Matrix, a $140 million Series B for Heron Power, and an $80 million raise by Amperesand—signals that this once-niche grid device is becoming a venture magnet.
The rush is fueled by a convergence few hardware categories enjoy: an aging transformer fleet, surging load from data centers and EV charging, and falling costs for silicon carbide and gallium nitride semiconductors. The U.S. Department of Energy has warned that a significant share of large power transformers are decades old, while the Edison Electric Institute has documented lead times that have stretched well past a year, throttling new capacity additions.
What Makes Solid-State Transformers Different
Traditional transformers are passive iron-and-copper machines that step voltage up or down—reliably, but without intelligence. Solid-state transformers (SSTs) use high-speed power semiconductors and control software to convert and shape power, integrating rectifiers, DC-DC converters, and inverters in one controllable package.
Because they are software-defined, SSTs can do more than voltage conversion. They can stabilize voltage, correct power factor, filter harmonics, and route power bi-directionally across multiple ports—AC and DC—at different voltages. In practical terms, one SST can replace a substation transformer, a rectifier, a static VAR compensator, and parts of a UPS chain, often shrinking total footprint by 50–70% based on vendor claims and early pilot results.
There is a materials story here, too. SSTs reduce dependence on copper and steel while leaning on power semiconductors whose costs have been trending down as manufacturing scales. Yole Développement projects rapid growth in the silicon carbide device market as 200 mm wafer lines come online, a key deflationary force for SST bills of materials.
Why Investment Is Moving Into Solid-State Transformers Now
Demand is the accelerant. The U.S. Energy Information Administration has forecast that data centers’ share of electricity consumption is rising sharply, while the International Energy Agency expects global data center demand to climb steeply as AI and cloud workloads proliferate. At the same time, utilities face interconnection queues and transformer shortages that slow capacity expansions just as loads grow more volatile.
EV fast-charging hubs amplify the challenge. Multi-megawatt sites create peaky, localized demand spikes that traditional gear wasn’t designed to smooth. SSTs can orchestrate power between the grid, on-site batteries, and chargers in real time, shaving peaks, exporting when prices are high, and soaking up surplus renewables when they’re cheap—a flexibility that can improve project returns.
Policy tailwinds help. DOE’s Grid Resilience and Innovation Partnerships program is pushing utilities toward digital, controllable infrastructure, while domestic manufacturing incentives for power electronics and wide-bandgap semiconductors are expanding U.S. supply. For investors, those forces translate into market pull, subsidy leverage, and reduced supply chain risk.
Data Centers Are the Beachhead for Solid-State Transformers
Nowhere is the value proposition clearer than inside data centers, where SSTs can collapse racks of rectifiers, transformers, and power distribution units into fewer boxes while natively supporting 380–400 V DC buses and 48 V server power architectures. That frees white-space, trims conversion losses, and improves ride-through during grid disturbances.
Heron Power, for example, says its medium-voltage SST platform can provide seconds of ride-through to keep servers alive while gensets or batteries synchronize—performance that historically required separate UPS systems. DG Matrix touts a multiport “Interport” architecture that routes power from the grid, solar, and storage to different voltage domains simultaneously, a trick that simplifies behind-the-meter microgrids. Amperesand is targeting the same needs for hyperscale campuses where every square foot and basis point of efficiency counts.
Risks and the Road to Grid-Scale Solid-State Adoption
The catch is cost. On a nameplate-to-nameplate basis, SSTs still carry a premium over iron-core transformers. Thermal management at medium voltage, cybersecurity for networked power controllers, and compliance with protection and interoperability standards (think IEEE and IEC families) add complexity.
That’s why the first wins are in environments where SSTs delete multiple boxes and unlock new revenue or savings. Utility adoption will scale as vendors complete type testing, demonstrate fault ride-through with existing protection schemes, and prove reliability. Big incumbents like Hitachi Energy, Siemens Energy, Eaton, and Schneider Electric are running pilots and developing compatible gear, a sign that integration hurdles are surmountable.
The Investor Math Behind Solid-State Transformers
The total addressable market is enormous. The U.S. alone operates tens of millions of distribution transformers, many past mid-life, and each replacement cycle is a chance to digitize the edge of the grid. Factor in data centers, EV hubs, solar-plus-storage plants, ports, and rail traction, and SSTs straddle multiple capex budgets with recurring software and service layers attached.
Margins can improve as silicon carbide capacity ramps—Wolfspeed and onsemi are expanding production—and as designs move from bespoke to modular. Crucially, SSTs are less exposed to commodity swings that buffet copper and electrical steel. For funds that prize defensible hardware with software upside, policy support, and multi-decade replacement cycles, it’s clear why solid-state transformers are suddenly the grid’s most intriguing growth story.
