Digital Substation Market Size, Share & Trends Analysis Report By Component (Substation Automation System, Communication Network, Electrical System, Transformer, Busbar, Protection System, Monitoring and Controlling Device, Human Machine Interface, Programmable Logic Controller, Other), By Architecture (Process, Bay, Station), By Application (Transmission, Distribution), By End-Use (Utility, Industrial), By Connectivity (<33kV, 33kV to 110kV, 110kV to 550kV, >550kV), By Voltage Level (High, Medium, Low), By Installation (New, Refurbished) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2023-2031

Market Overview

The global digital substation market size was valued at USD 6.9 billion in 2022, registering a CAGR of 7.2% during the forecast period (2023-2031). The use of digital substations for producing renewable energy and providing more desirable dependability, efficiency, and protection within the power distribution, as well as the rise of automation and better networking trends, stimulate market growth.

A digital substation is a more advanced and modernized form of a typical electrical substation that plays an important role in the Transmission and distribution of electrical power within an electrical grid. Digital substations use technology, communication networks, and automation to increase power infrastructure efficiency, dependability, and monitoring. Digital substation industry share is expected to rise significantly because of the use of digital substations for producing renewable energy and providing more desirable dependability, efficiency, and protection within the power distribution, as well as the rise of automation and better networking trends.

Market Dynamics

Market Drivers

Aging Infrastructure

Many of the world's electrical networks have aged infrastructure that requires significant renovations and maintenance. Traditional substations, part of this aging infrastructure, frequently rely on older technologies and equipment that may not match modern power distribution demands. Digital substations provide a cost-effective option for addressing these difficulties by boosting performance and lowering maintenance expenses. The deterioration of the electrical infrastructure in the United States is a major source of concern. Many substations and grid components were constructed decades ago and are nearing the end of their operational lives. 

The American Society of Civil Engineers' "2021 Report Card for America's Infrastructure" assigned the U.S. electrical grid a "C-" rating and noted aging infrastructure as a major concern. It underlined the importance of grid modernization and the use of digital technologies. The federal and state governments in the United States have set aside large funds for grid upgrade projects. For example, the U.S. Department of Energy (DOE) committed $47 million in financing for grid modernization research and development in 2021. As a result, the digital substation market trend is influenced by the global adoption of digitalization.

Market Restraints

High Initial Cost

The considerable upfront capital investment required is one of the key barriers to the deployment of digital substations. This covers the expense of replacing or updating current analog equipment, deploying modern sensors, establishing reliable communication networks, and putting automation systems in place. The cost of installing a digital substation can vary greatly based on factors such as substation size, level of infrastructure replacement, and communication network complexity. The cost of a substation can range from several million to tens of millions of dollars. According to industry analysts and studies, adopting a digital substation can range between USD 2 million and USD 5 million for a small substation and more than USD 10 million for a bigger, more complicated substation. The size and complexity of the substation heavily influence costs. Therefore, these factors are expected to hinder the digital substation market growth.

Market Opportunities

Global Electrification

The worldwide electrification trend, which comprises the rising use of electricity as an energy source across numerous sectors, presents a huge opportunity for the digital substation industry. The demand for reliable and efficient electrical grids, including digital substations, will likely rise as more areas and sectors electrify. For example, India is making enormous efforts to electrify its transportation industry, notably through the adoption of electric buses and electric railways. Electric buses are used for public transportation in several Indian cities, including Delhi, Mumbai, and Bangalore. Electric buses are being used to help cut down on air pollution and greenhouse gas emissions. This effort is paving the way for digital substations.

According to the International Energy Agency (IEA), worldwide electricity demand will rise faster than demand for other energy carriers, owing to electrification in many sectors. Electricity will account for more than 40% of total energy consumption by 2040. The National Institution for Transforming India (NITI Aayog) of the Government of India has set lofty aims for the electrification of the transportation industry. These goals include electrifying all urban buses by 2030 and fully electrifying the Indian Railways.

Regional Analysis

The global digital substation market analysis is conducted in North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

North America holds the largest share of the global market and is expected to demonstrate a 7.4% CAGR over the forecast period.  Advanced control and monitoring skills at the distribution level are necessary because of the growth of distributed energy resources such as rooftop solar panels, energy storage systems, and electric car charging stations. Utilities can effectively regulate these decentralized resources because of digital substations.

Furthermore, the United States Digital Substation market had the greatest market share, while the Canada Digital Substation industry was the fastest expanding in the North American area. Regarding market share, the United States market dominates the North American area. Rising energy consumption in the United States is driving the expansion, which can be ascribed to ongoing commercial and industrial infrastructure developments. This is likely to increase regional product penetration. With the broad use of renewable energy, new grids have been developed, and businesses are increasing their use of cutting-edge technology to improve power delivery while enhancing productivity and efficiency.

Asia-Pacific Digital Substation Industry is anticipated to exhibit a CAGR of 7.80% over the forecast period. During the projection period, the Chinese market would survive and grow significantly. The digitization of major sectors is related to growth. The power supply business in China is undergoing a digital transition, expanding monitoring and response measures. Asia Pacific (APAC) is predicted to be a successful region for digital substations due to rising energy demand and rural electrification. India is likewise growing at a rapid pace. The expansion can be linked to the modernization of industrial infrastructure, which is expected to continue. In Sichuan, for example, N.R. powered a 500kV digital substation. The addition has increased the power supply while also improving the monitoring operations.

Furthermore, the Government of India has undertaken several projects to revitalize utility power distribution and rural electrification systems. Furthermore, the Chinese government intends to invest USD 31 billion in smart grids by 2020, which will involve building digital substations. Similarly, grid modernization investments are being made in nations such as Indonesia, Malaysia, South Korea, Japan, and others in South Asia. These reasons are driving the expansion of the region's digital substation market. In their country, the Indian government is implementing the smart infrastructure concept. The smart power infrastructure involves grid digitalization, which aids in distributing uninterrupted electricity to industrial, residential, and commercial end users.

The European digital substation Industry is predicted to rise rapidly at CAGR 7.2% throughout the forecast period. The rehabilitation and replacement of traditional grid infrastructure and growing concerns about grid security and power supply reliability will increase regional product demand. Favorable schemes and incentives to incorporate I.T. solutions across the power sector will significantly accelerate the development of grid networks, proliferating industry dynamics; however, the impact of the COVID-19 pandemic on the region's power industry may limit the streamlined flow of supplies until the second quarter of 2022.

Additionally, during the anticipated timeline, ongoing immunization programs and the removal of lockdown protocols will supplement product preference. The market in the United Kingdom expanded tremendously. The improvements, digitization, and efficient electricity transmission are attributed to the rise. Siemens Energy intends to deliver high-performance digital substations that will work towards improved power distribution. Heerema Marine contractors erected the world's first unmanned high voltage direct current offshore substation at the Dogger Bank wind farm. 

The Compound Annual Growth Rate for the MEA (Middle East and Africa) market is 6.70%, while the LATAM (Latin America) market is projected to grow at a CAGR of 6.40%.

Segmental Analysis

The global digital substation market is segmented based on component, architecture, application, end-user, Connectivity, voltage level, installation, and region.

The component is further segmented into a Substation Automation System, Communication Network, Electrical System, Transformer, Busbar, Protection System, Monitoring and Controlling Device, Human Machine Interface, Programmable Logic Controller, and others.

Substation Automation System is the largest contributor to the market. The substation automation system is a digital substation's principal control and monitoring system. It consists of hardware and software components allowing real-time monitoring, control, and data collecting within the substation. Intelligent Electronic Devices (IEDs) and a supervisory control and data acquisition (SCADA) system are frequently used.

The market is sub-segmented based on Process, Bay, and Station architecture.

Station architecture led the market growth. Station architecture represents a higher-level organization of different bays and operations within a substation. It specifies the linkages, communication networks, and coordination among bays and substations. Station architecture is concerned with the overall operation and control of the substation.

Based on application, the market is divided into Transmission distribution.

Distribution influenced the market growth. Distribution entails the installation of digital substations within the electrical grid's lower-voltage distribution segment. These substations are often located closer to end-users, such as residential, commercial, and industrial clients, and are in charge of supplying energy on a local level.

By end-use, the segment can be further bifurcated into utility industrial.

Utility occupied the major share of the market. Utility corporations' deployment of digital substations responsible for generating, transferring, and distributing electrical power to end customers is called utility. These substations are intended to improve grid dependability, maximize energy delivery, and effectively manage the electrical grid infrastructure.

Based on Connectivity, the market is fragmented into <33kV, 33kV to 110kV, 110kV to 550kV, and>550kV.

<33kV holds the major market share. <33kV sub-segment includes digital substations with less than 33,000 volts (33 kV). These substations are most commonly found in distribution networks and service locations closer to end customers, such as residential neighborhoods, commercial districts, and small-scale industrial operations.

The market is classified into high, medium, and low based on voltage level.

Medium is the highest level of voltage deployed in the market. Medium Voltage (MV) substations are digital substations that operate at medium voltage levels. Medium voltage levels are widely related to distribution networks and typically vary from 1 kV to 33 kV.

Based on installation, the market is bifurcated into new refurbished.

New installation is the highest income generator. New Installation refers to deploying digital substations in completely new or greenfield locations. In some circumstances, the substation is built from the ground up rather than replacing an existing substation. New installations are typical when expanding the electrical grid to accommodate increased demand or building new substations to serve new areas or sectors.

Recent Developments

• September 2023- ABB invested in a strategic alliance with a sustainable energy start-up to provide an end-to-end wind energy portfolio.
• August 2023- GE Vernova acquired Greenbird to accelerate GridOS® innovation and assist utilities in reducing the complexity of energy data integration.
• August 2023- Eaton invested more than USD 500 million in North American manufacturing to help industries with electrification, energy change, and digitalization.