Energy startup finds success by reviving century-old power grid technology

Rising demand for electrical transformers — driven in part by the expansion of AI-powered data centres — has reached such levels that at least one major investor is backing a new startup built around a technology that has existed for more than a hundred years.

Ayr Energy produces transformers using iron-core designs, the same foundational technology that has supported electrical grids for over a century. While several newer companies are attempting to replace iron-core transformers with modern alternatives, Ayr and its backers believe the established approach still has significant potential. Based on the company’s growing order book, which has surpassed $500 million, that confidence may be well placed.

“We explored multiple funding options when we first launched,” said Anirudh Reddy, co-founder and CEO of Ayr. “But the scale of the opportunity made venture capital the right fit, allowing us to take early risks with the potential for strong long-term returns.”

That opportunity has drawn attention from investors, including Energy Impact Partners. To date, the company has raised a total of $25 million across two funding rounds.

Such enthusiasm is unusual for a sector often viewed as mature and commoditised. Ayr is competing against long-established industrial giants such as General Electric, Siemens, and Mitsubishi Electric, all of which have decades of experience manufacturing transformers.

For many years, demand for transformers followed predictable patterns. Electricity consumption in developed markets remained relatively stable, making it easier for manufacturers to plan production. However, the recent wave of electrification — combined with rapid growth in AI infrastructure — has significantly increased demand. According to Global Market Insights, demand is expected to double by the middle of the next decade.

Despite this surge, existing suppliers have been cautious about expanding production capacity, partly because they have experienced previous cycles where demand rose sharply and then declined.

Reddy and his team, however, identified a different trend. “As we looked deeper, it became clear that demand is coming from multiple sources, not just one,” he said. “This could represent a longer-term supercycle rather than the short-term spikes the industry has seen before.”

Instead of building its own factories, Ayr collaborates with transformer manufacturers in India that produce equipment to its specifications. According to Reddy, Ayr’s designs are more modular than traditional transformers, giving customers greater flexibility to adjust orders later in the process.

This adaptability is particularly valuable for clients such as renewable energy developers, independent power producers, and data centre operators. With equipment lead times lengthening, many customers are forced to place orders before projects are fully finalised. If requirements change, they risk ending up with transformers that do not match their needs. Established manufacturers typically customise each unit for a specific project, making modifications difficult once production has begun.

Ayr and its investors are betting that the current surge in demand will create room for a new entrant in the transformer market. The company plans to use this opportunity to establish credibility with customers and, over time, introduce newer technologies such as solid-state transformers.

“That has been our strategy from the beginning,” Reddy said.