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Since the late 1800s, the grid has used more or less the same devices to convert electricity to different voltages. They’re called transformers — and they’re in increasingly short supply as power demand surges nationwide.
A crop of startups wants to solve that problem and modernize transformer technology at the same time — and they’re raising financing to do it.
On Wednesday, solid-state transformer startup Heron Power closed a $140 million Series B round from investors including Andreessen Horowitz’s American Dynamism Fund and Breakthrough Energy Ventures.
The new financing will allow the Northern California–based startup to build a factory at a yet-to-be-disclosed U.S. location capable of churning out 40 gigawatts of its medium-voltage power-conversion gear annually. It plans to start full-scale production in the second half of 2027 and have hundreds of megawatts of equipment produced by the end of that year.
Heron Power has already lined up 50 gigawatts of orders with more than a dozen prospective customers that are “actively engaged in technical product collaborations,” according to CEO Drew Baglino, who founded the startup in 2025 after an 18-year career at Tesla.
The firm is looking to initially sell not to utilities but rather to operators of solar and battery farms and data center campuses, which need to convert electricity as well. So far, it has disclosed only two of its early customers: Intersect Power, a major clean-energy developer that Google is acquiring for $4.75 billion, and Crusoe, a data center developer building a 1.2-gigawatt campus in Abilene, Texas.
While Baglino declined to share details about other prospective customers, he did say that Heron Power has been bringing many of them into its lab to see the prototype equipment being put through its paces. “We’re also doing integrated full-system deployments later this year,” he said. “It helps immensely for folks to get a sense of what we’re talking about and see the power processing in front of them.”
Heron Power isn’t the only company building next-generation power-conversion equipment. DG Matrix is planning to deploy its solid-state transformer via strategic partnerships with PowerSecure, a major developer of microgrids and data-center power systems that’s owned by utility Southern Co., and with Exowatt, a startup providing solar and thermal energy storage systems to data centers.
On Wednesday, the Raleigh, North Carolina–based DG Matrix announced a $60 million investment led by Engine Ventures and including Mitsubishi Heavy Industries and electrical-equipment manufacturing giant ABB. The Series A funding will enable the company to scale up manufacturing and deepen “strategic partnerships with datacenter developers, hyperscalers, utilities, and industrial customers,” according to the company’s press release.
Another startup in the space, Resilient Power, was acquired last year by electrical equipment giant Eaton in a deal worth as much as $150 million.
Solid-state transformers digitally manipulate the flow of electricity, employing the same kind of power electronics that are used in solar and battery inverters and in electric vehicle drivetrains. “Solid state” refers to the semiconductors that make that digital power manipulation possible. “Transformers” is a nod to the 19th-century electromechanical devices that convert the voltage of alternating current via copper wires wound around iron cores.
Solid-state transformers are a timely replacement for those devices for a couple of reasons. They’re far more flexible than old-school electromagnetic devices, meaning engineers can do more things with one device. They’re also urgently needed because conventional power equipment — particularly transformers — has been unable to keep up with the demand created by the fast-growing electricity sector.
The technology itself is not brand new. High-frequency digital power-switching technologies are already used for specialized purposes such as massive high-voltage direct current (HVDC) converters. And inverters — another form of digital power-switching tech — are an integral part of EV chargers and solar and battery installations.
Over the past decade or more, various efforts to expand the role of solid-state power-conversion technologies to replace a wider array of systems have struggled to gain traction, given high costs and technical challenges. But Heron Power’s Baglino thinks that the time is right for this tech, as costs come down and major customers seek out effective alternatives to the backlogged and increasingly expensive conventional options.
As with many other digital technologies, “power semiconductors have had their own version of Moore’s law,” Baglino said. In the past five years or so, these improvements have made it “not only feasible but economically attractive to replace inverter skids — with an old-school transformer at solar and battery facilities — with a power electronics solution.”
Those “inverter skids” he mentioned are shipping-container-size combinations of electrical gear — step-down and step-up transformers, switching and protection gear, and inverters themselves — that convert direct current from solar panels and batteries to grid-ready alternating current. Similar combinations of gear are used to convert grid electricity to direct current needed to power heftier commercial and industrial sites — such as data centers.
Unlike traditional high-efficiency transformers, solid-state power-conversion devices don’t need specialized grain-oriented electrical steel, which is now in short supply. Instead, they use the same silicon carbide and gallium arsenide semiconductor supply chains feeding EV markets, Baglino said, “and the EV supply chain has expanded rapidly over the past decade or so.”
Solid-state transformers also weigh less and take up less space than the gear they replace, he said. They’re capable of a wider range of functions, including regulating power quality fluctuations, which can wreak havoc on data centers, and they can be used for multiple applications, unlike traditional equipment.
As for the cost, Baglino said prices for Heron Power’s electronics are competitive with those for traditional tech. “We’re not asking for any premium over the solutions they’re buying right now.”
Like DG Matrix and Resilient Power, Heron Power is targeting data centers, solar and battery farms, and dense EV charging sites for early adoption, since that’s a “fast-growing market with motivated customers,” Baglino said.
Heron Power’s Heron Link devices are designed to handle typical utility distribution substation voltages of 34.5 kilovolts and to deliver 600-volt direct current. That higher-than-typical voltage aligns with the latest data center power architectures being pursued by major AI players such as Nvidia.
“But we have every intention of bringing the benefits of solid-state transformers to the AC-to-AC world,” he said, referring to the need for transformers to step voltage up and down without converting it to direct current. “A single SST can decouple faults, it can do power factor control, it can do voltage regulation, frequency regulation, all this monitoring and control of the power flow that utilities don’t have with passive transformers.”
While these are all useful capabilities, utilities are not eager adopters of novel technologies. Over the previous decade, companies that have built power electronics for utility distribution grids have closed up shop or have been acquired and fallen from public view.
But the combination of technical improvements and growing grid pressures may make this decade different. “Once we prove the technology is performing well” for solar farms and data centers, Baglino said, “we can go back to utilities.”
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