Why investors are turning to solid-state converters

It’s no secret that the electrical grid is old, but one part of it stands out from the rest. Transformers haven’t changed much since Thomas Edison made his first light bulb.

Now, a series of startups are modernizing the inverter, replacing it with modern power electronics that promise to give grid operators more control over how and where electricity flows.

“It has become a very powerful device, equivalent to your internet router,” Subhashish Bhattacharya, co-founder and CTO of DG Matrix, told TechCrunch.

Three startups recently raised large rounds to scale up production of their solid-state converter technologies. This week, DG Matrix raised a $60 million Series A and Heron Power raised $140 million in a Series B round. In November, Amperesand raised $80 million to go after the booming data center market.

Existing transformers are reliable and efficient, but that’s about it. They are relatively primitive tools, made largely of copper and iron. These devices react passively to changes occurring on the network and are able to process only one task per device.

“Legacy steel, copper and oil transformers have no oversight, they have no control,” Drew Baglino, founder and CEO of Heron Power, told TechCrunch. In cases where electricity spikes or a power plant stops working, this can create a liability.

The devices can combine energy from a range of different sources – including conventional power plants, renewables, and batteries – and convert that electricity into either alternating current (AC) or direct current (DC) at a number of different voltages, allowing them to replace many devices.

For data centers, solid-state inverters offer an attractive alternative, allowing them to reduce the footprint of their power systems while giving them better control over where and how electricity is routed.

Solid-state converters are expected to arrive at a time when existing converters are aging and demand for new converters is increasing – a classic technological super cycle. Most of the switches on the grid today are several decades old, according to the Rocky Mountain National Laboratory. As demand rises from data centers, electric vehicle chargers, and other parts of the grid, NLR expects the amount of power flowing through transformers to double by 2050.

While data centers are the first market these companies are pursuing, they are also setting their sights on the electrical grid, which in the United States alone hosts up to 80 million switches.

“All of the distribution transformers will eventually need to be replaced. More than 50% of them are 35 years old. There is a huge need for modernization,” Baglino said.

Since they are made of silicone-based materials, they are flexible and can be controlled and updated by software. They are also immune to the price fluctuations that rock the copper market.

“Power semiconductor prices continue to decline. Unfortunately, steel, copper and oil are not in this situation,” Baglino said. “Commodity prices can move all over the place, and they are generally rising.”

In old-style transformers, power flows into the transformer through copper wires wrapped around one side of an O-shaped iron core. As electricity flows, it generates a magnetic field in the core. On the other side of the core, the magnetic field induces electricity in another set of copper windings. If the wires wrap around the core more times on the input side than on the output side, the voltage drops on the output side. If the ratio is reversed, the output voltage increases.

Solid-state converters eschew copper windings in favor of semiconductors, using materials such as silicon carbide or gallium nitride to handle the frequency conversion. They can come in a range of configurations, with the most comprehensive setup consisting of three basic parts: a rectifier that converts alternating current into direct current, a converter that changes the direct current voltage, and an inverter that changes direct current back into alternating current.

Unlike iron-core converters, solid-state converters can handle power flowing in both directions, making them useful in places that need backup power, such as data centers.

In a data center, a solid-state converter can replace several different pieces of equipment, not just the converter that steps down the voltage from the grid. Each data center uses backup power, which requires a series of devices to deliver power to the facility. Solid-state converters can handle all of these duties in one box.

This technology also allows data centers to more easily integrate so-called behind-the-meter power, where generation capacity is tied directly to the data center, rather than to the grid. These usually require another set of adapters.

When coupled with grid-scale batteries, solid-state inverters can eliminate uninterruptible power supplies (UPS), as well, freeing up space within the data center for more racks.

“If you add up the cost of everything we took away, we get 60% to 70% of that cost,” Aaron Inam, co-founder and CEO of DG Matrix, told TechCrunch.

DG Matrix focuses on its Interport technology, which can route power from multiple sources to multiple loads at different voltages, a setup on which the company has several patents.

Meanwhile, Heron Power converts medium-voltage power in data centers, solar farms, and grid-scale battery installations. In the data center, Heron Link switches can provide racks with 30 seconds of power while backup sources come online. Overall, the Heron Link takes up 70% less space than existing parts. On a solar farm, Heron Power inverters can perform both inverter and converter duties for the same price.

In direct comparison, solid-state converters still require a cost premium compared to iron-core converters. For this reason, they are unlikely to replace giant buzzer boxes at grid substations in the very near future.

But in data centers and electric vehicle charging centers, where solid-state inverters replace several pieces of equipment, they will start to make inroads.

When they finally reach the grid in greater numbers, they will have the potential to reduce transmission and distribution costs, one of the biggest contributors to inflated utility bills.

Because existing transformers are passive and unable to respond to fluctuations, distribution networks are built with a large amount of excess power, Baglino said. However, solid-state inverters can respond to changing conditions, allowing grid operators to send more power over the same lines.

“You can actually make infrastructure more affordable because you’re putting more kilowatt-hours through the same poles and wires,” he said. “This is where intelligence, rather than passive mechanical objects designed 100 years ago, can make a big difference.”