A wave of startups is raising hundreds of millions to commercialise solid-state transformers, a modern alternative to the century-old technology that underpins the global electrical grid. The new devices, which use semiconductors instead of copper and iron, promise to give operators unprecedented control over power flow and are poised to capitalise on surging demand from data centres and renewable energy projects.

This week, DG Matrix secured a $60 million Series A round and Heron Power raised $140 million in a Series B. In November, Amperesand raised $80 million, bringing the recent total investment to $280 million. The companies are targeting the data centre market first, but ultimately aim to upgrade the estimated 80 million transformers on the U.S. grid alone.

The End of the Passive Grid

Traditional transformers, largely unchanged since the 19th century, are passive devices made of copper windings around an iron core. They efficiently change voltage but cannot monitor or control electricity. “An old-school steel, copper, and oil transformer doesn’t have any monitoring, doesn’t have any control,” said Drew Baglino, founder and CEO of Heron Power. This passivity forces grid operators to build significant spare capacity into distribution networks to handle fluctuations.

Solid-state transformers replace copper and iron with semiconductors like silicon carbide. They can convert power between alternating current (AC) and direct current (DC) at various voltages, handle bidirectional power flow, and are software-updatable. “It becomes a very powerful device, equivalent to your internet router,” explained Subhashish Bhattacharya, co-founder and CTO of DG Matrix.

Data Centres Drive Initial Adoption

The technology's first major application is in data centres, where it can consolidate multiple pieces of power equipment—including transformers, rectifiers, and uninterruptible power supplies (UPS)—into a single, smaller unit. This reduces the facility's power system footprint and improves efficiency.

Heron Power's Heron Link transformers can provide server racks with 30 seconds of backup power and occupy 70% less space than conventional parts. DG Matrix's patented 'Interport' technology can route power from multiple sources to multiple loads at different voltages. “If you add up the cost of everything we’ve taken out, we’re 60% to 70% of that cost,” said Haroon Inam, co-founder and CEO of DG Matrix.

A Grid-Wide Transformation Ahead

The push for modernisation comes amid a critical need. Most grid transformers are several decades old, and power demand is expected to double by 2050 due to data centres, electric vehicle chargers, and industrial electrification. “All of the distribution transformers are ultimately going to need to be replaced. Over 50% of them are 35 years old. There’s a big need for an upgrade,” Baglino stated.

While solid-state transformers currently carry a cost premium, making them unlikely to immediately replace substation giants, their ability to send more power through existing infrastructure offers long-term savings. “You can actually make the infrastructure more affordable because you’re putting more kilowatt-hours through the same poles and wires,” Baglino added. This intelligence could help curb rising transmission costs, a major contributor to utility bills.

The technology also facilitates the integration of 'behind-the-meter' power generation, like solar panels connected directly to a data centre, and works seamlessly with grid-scale batteries. Heron Power's devices can perform the combined function of an inverter and transformer for solar farms at a comparable cost.