The global substation automation market expected value at $55.69Bn by 2032

With the increasing demand for electric and hybrid vehicles, coupled with the rising use of digital technology to improve grid efficiency in smart cities, the overall demand for substation automation is projected to grow at a CAGR of 6.7% between 2022 and 2032, totalling around $55.69 Billion by 2032.

Substation automation is a method of using data from intelligent electronic devices. It refers to controlling and automating the capabilities within the substation and controlling power systems devices through commands from remote users. To make the electricity substations automated, the use of equipment such as specific software, special sensors, and equipment that facilitate two-way communication is entailed.

In addition, there is the use of intelligent electronic devices such as protective relays, programmable logical control, and a digital transducer. Such type of equipment helps in the monitoring and controlling of substation equipment. Also, with the help of such equipment, the incidences and duration of power outages are reduced.

The key market driver of this market is to reduce human intervention and improve the operating efficiency of the system. Also, increasing developments in SCADA and communication technologies along with rising demand for renewable energy projects, drive the market growth.

Which drivers underpin substation automation industry expansion?

Increasing investments in smart grid infrastructure development to fuel the market growth

Substation automation assists with reducing operational as well as maintenance costs and increase plant productivity using enhanced technologies. It also ensures high performance, reliability, and safety of electrical power network performing interlocking and smart load shedding functions.

Smart grids can reduce energy losses during transmission and distribution, improve reliability and productivity, and manage energy demand smartly and cost-effectively.

Considering all these benefits, heavy investments are being made for the development of smart grids across the world. For instance, in May 2018, Natural Resource Canada announced an investment of $949,000 for a next-generation smart grid project.

The grid project focuses on promoting the adoption of renewable sources of energy and the implementation of technology to integrate new sources of clean energy without compromising the stability and reliability of existing grids.

The Government of Germany is making multiple initiatives to completely digitalise various operations in the railways sector; for example, the automatic operation of trains on the mainline network using automated substations. According to the International Railway Journal, the Government of Germany has invested $80 million in developing digital applications to increase the network capacity.

Huge prospects for substation automation to augment the market growth

Solar and wind are currently the mainstream options in the power sector, with most countries generating more than 20% of their electricity using solar and wind energy sources. According to the International Energy Agency (IEA), the share of renewable sources in world electricity generation reached 25% in 2019.

By 2050, renewable power will be able to provide the bulk of global power demand, which would be approximately 86%. Companies across the world are focusing on investing into sustainable energy infrastructure than that of in fossil fuels.

According to the IEA’s World Energy Investment 2020 report, total investment in renewable energy sources amounted to $259 billion and $226 billion in 2019 and 2020, respectively. The decline in 2020 was much because of the economic crisis due to the outbreak of the COVID-19 pandemic.

Countries worldwide are trying to come up with new renewable projects for electricity generation. They are also investing in solar and wind projects to meet the growing demand for electricity and minimise the environmental impacts, along with investments in generating power using non-renewable sources at the same time.

Increase in population and the subsequent rise in electricity demand boding well for substation automation expansion

Electricity has gained significant importance in daily life, similar to air and water. Residential, commercial, and industrial users, each, account for roughly one-third of the nation’s electricity use.

On an average, the biggest single uses of electricity in the residential sector are space heating and cooling (air conditioning), lighting, water heating, space heating, home appliances, and electronics. Demand for electricity in the residential sector increases on hot summer afternoons due to rise in use of ACs, fans, and coolers.

The commercial sector comprises government organisations, service-providing facilities and equipment, and other public and private entities. Usually, the substantial single uses of electricity in the commercial sector are lighting, heating, ventilation, and air cooling and conditioning.

Electricity requirement in the commercial areas rise during operating business hours, and it may reduce substantially on nights and weekends. Electricity use in the industrial sector generally does not fluctuate through the day or year, as in the case of residential and commercial sectors, particularly at manufacturing facilities that operate round-the-clock.

For instance, in 2019, according to IEA, the world’s total electricity final consumption reached 22,848TWh, up 1.7% from 2018. In 2019, (OECD Organization for Economic Cooperation and Development) the total electricity final consumption stood at 9,672TWh, 1.1% lower than in 2018, while final electricity consumption in non-OECD countries was 13,176TWh, an increase of 3.8% from 2018.

Which factors are limiting the growth of substation automation market?

Slowdown in power generation industry to limit the market growth

The COVID-19 pandemic had slowed the growth of the power generation industry in 2020. Electricity demand was depressed by 20% during periods of full lockdown in several countries. With this decrease in power demand, there has been very few investments from utilities for automating substations since 2020.

Since COVID-19 has delayed deliveries from China, renewable energy companies are not able to comply with deadlines for equipment installation. For instance, in India alone, 3,000MW of solar and wind energy projects were delayed due to the lockdown.

BYD (China), the world’s leading producer of rechargeable batteries, was unable to test new models of rechargeable batteries due to the pandemic, and this has led to a reduction in delivery volumes of rechargeable batteries in the European market.

High installation cost of IEDs in substations to act a market restraint

The initial phase of automating the substation is capital-intensive, which may restrain the growth of the global substation automation market. The increasing use of advanced technologies such as microprocessor and service-oriented architecture (SOA) and the rising requirement to embed several IEDs in substations have increased the purchase costs of these substations.

Moreover, an effective deployment of smart substations requires strong coordination across customary organisational boundaries, significant process change, and rigorous governance. High investments for fruitful deployment of smart substations could add to the governments’ economic burden. High operational and maintenance costs after the deployment are also a big concern for utility providers.

Region-wise insights

Will North America continue dominance in the global substation automation market?

Increasing investment in energy infrastructure in the region

The North America substation automation market is expected to accumulate the highest market share of 36.0% in 2022. On geographic basis, North America is anticipated to be the largest market for Substation Automation, owing to the increasing popularity and adoption of advanced intelligent electronic device & communication technologies.

This is helping the substation automation market growth along with the technology development in the electrical field in countries like the US and Canada.

Factors such as increasing investment in energy infrastructure by different governments owing increasing urbanisation and higher energy demand is one of the major factors that is expected to boost the growth of the Substation Automation Market in the region, over the analysis period.

In addition, increasing dependence on electricity, demand from the power system for advanced technology, requirements to reduce maintenance and operating costs, and implementation of government incentives are primarily driving the substation automation market size in North America.