Demand for electrical transformers has surged, driven partly by AI data centers, leading a prominent investor to support a new startup using established technology.
Ayr Energy produces transformers with iron cores, a technology that has been part of the grid for over a century. While other startups aim to replace iron-core transformers, Ayr and its backers believe the old tech still has potential. Their order book, now over $500 million, supports this view.
“We considered multiple funding options at the start,” said Ayr co-founder and CEO Anirudh Reddy. “Venture capital allowed us to take risks upfront for potential significant returns.”
This is unusual for a commoditized industry. Ayr competes with industry giants like GE, Siemens, and Mitsubishi, who have long dominated the market.
Previously, transformer demand was predictable, but electrification and AI have drastically increased it. According to Global Market Insights, demand might double by the mid-2030s.
Existing suppliers, cautious from past market fluctuations, have been reluctant to expand manufacturing.
Reddy and his team noticed a broader range of factors driving current demand. “It could be a sustained cycle rather than the short spikes seen before.”
Ayr collaborates with Indian manufacturers, providing unique specifications for modular designs, which allow order changes mid-process.
This adaptability is advantageous for Ayr’s clients, such as renewable energy companies, power producers, and data center developers, who face prolonged equipment lead times. Traditional tailored transformers are less flexible for adjustments.
Ayr and its investors bet that rising demand will create opportunities for their new manufacturing approach. They aim to establish themselves, then introduce innovations like solid-state transformers. “That was our strategy from the start,” Reddy stated.