Ayr Energy is bringing manufacturing principles from the automotive industry to one of the biggest bottlenecks facing U.S. energy growth today: a massive shortage of power grid equipment.
The supply chain for equipment like transformers, circuit breakers, and switch gears has long been concentrated among a handful of multinational incumbents — including General Electric, Siemens, Schneider Electric, Hitachi Energy — and relies heavily on China for component manufacturing. It’s a mature sector manufacturing complex products, which are traditionally custom-built for individual buyers. And it comes with high up-front costs.
But it’s a sector that appears to be caught off-guard by the surge in demand for grid equipment, spurred by electrification, the artificial intelligence boom, and the simple reality of aging infrastructure. Today, lead times for high voltage equipment range from three to five years.
The California-based Ayr Energy, which is emerging from stealth today with backing from General Catalyst, is seeking to upend the U.S. market for grid equipment — and bring lead times down to one year — by reimagining every element of the supply chain, from contracting and design to manufacturing.
The company’s supply chain circumvents China entirely and skips the up-to-six-year wait times for most new factories to reach nameplate capacity, by leveraging excess capacity at established factories in India. Those factories are already manufacturing power grid equipment for their domestic markets as well as for Southeast Asian markets, Ayr co-founder and CEO Anirudh Reddy told Latitude Media. But crucially, those Indian manufacturers invested well ahead of local demand, meaning they have available production capacity that Ayr was able to tap into immediately.
Ayr is also standardizing certain components with particularly long lead times, a move that forces developers to decrease the level of customization in their orders. That approach, the company asserts, is already cutting lead times for critical equipment in half.
“By making it more generic to order, you’re moving closer to how an automotive company would operate,” explained Reddy. Given the nature of power grid equipment, it’s not possible to transfer over all of the approaches from the automotive industry, he added; but applying some of that sector’s learnings and best practices is allowing Ayr to “unlock efficiencies across the process that are adding up to meaningful amounts when everything comes together.”
So far, the company has more than $250 million in signed equipment orders, for planned projects that total 10 gigawatts.
The auto industry approach
Reddy, a former automotive manufacturing executive who got his start in electronics manufacturing at Eaton, set out early last year to understand why things were “bad and getting worse” in the world of critical grid infrastructure equipment. Wait times for key equipment were “sky high” and getting longer, and the gap between supply and demand was growing. And incumbents didn’t seem to be acting fast enough to solve the problem.
That’s partly because grid equipment manufacturing is something of a “cyclical business,” Reddy said. Nobody expected the confluence of factors like load growth and tariffs that currently exist.
For more on the transformer shortage, listen to Tim Mills, who heads the transformer manufacturer ERMCO, on Catalyst with Shayle Kann:
And by the time the legacy manufacturers realized the boom in demand was more than a short-term cycle, it was too late. By late 2024, lead times for transformers were averaging two years, and could be as long as four.
“The way these legacy companies are structured, a lot of the capacity can only come online a few years later; it’s not just a function of deploying more capital to build factories or buy more equipment,” Reddy explained. “Lots of these equipment are very labor intensive, and a lot of the factories were in nations where skilled labor wasn’t as easily accessible.”
In the world of grid equipment, customers have historically placed orders“before they do anything else with the project,” Reddy said. That means when an incumbent manufacturer receives an order, they’re often not starting the manufacturing process for years afterward. In the interim, projects are getting clarity on what they need, and design customization is happening at the very front end.
The opposite is true in the automotive industry, according to Reddy: “The [core structural framework of the car] remains the same. The customization comes in at the last stage of the manufacturing process.”
In other words, there’s really nothing holding up cars coming off the line.
Ayr’s decision to eliminate much of the customization at the front end of manufacturing power grid equipment, Reddy said, allows the company “to unlock bottlenecks in manufacturing and in the supply chain that flow all the way to the last component.”
For example, both high-voltage bushings and load tap changers have some of the longest lead times, but are required in essentially every grid project. Incumbent manufacturers aren’t ordering the two components until all of the customization details of a high-voltage transformer order are locked in. Ayr, meanwhile, orders them up front based on their expected orderbook. The customization for customers then happens where the transformer is assembled, in India.
That part of the process is being conducted via a model that’s common in the automotive and consumer electronics markets, Reddy explained: Ayr is partnered with multiple Indian manufacturers who operate as OEMs in the domestic market, but work as contract manufacturers for Ayr’s designs. That keeps the company’s early costs down, because though they design the equipment and manage component ordering, the company doesn’t have to shell out the cash to build their own factories just yet.
“We’re also forging partnerships where we are giving suppliers of components certainty that this is what we need and when we need it, and we can use them flexibly across different projects that we have,” Reddy added.
Meeting the moment
Ayr’s approach is really only possible, Reddy acknowledged, because of the environment developers — and particularly those building in the U.S. — find themselves in today.
“We have the ability right now because of the way the industry is operating, to say ‘hey, we know you want this, but there’s a specification that we think can be really efficient that’s not very far from what you’re asking for…that eliminates 70% of the variability in the entire process,’” he said.
Availability of components is far from the only barrier preventing projects from coming online — permitting and interconnection queues remain key challenges as well — but whether equipment is available when needed can “make or break” a project, Reddy explained.
That’s especially true now, when developers are facing significantly shortened timelines to qualify for Inflation Reduction Act tax credits, thanks to the passage of the GOP’s “One Big Beautiful Bill.” Many of the projects in Ayr Energy’s pipeline, Reddy said, are looking to move quickly in order to qualify for those credits.
“A lot of the projects that have recently moved forward with orders are solar and not battery storage,” he said. That’s a direct result of the final shape of the reconciliation bill, which left storage incentives intact for much longer than those for wind and solar projects. Another key trend in Ayr’s pipeline, Reddy said, is projects that are slated for co-location with data centers (though most of those will also be grid-tied).
The cyclical nature of grid upgrades is key to Ayr’s market opportunity. But it also means that Ayr itself will eventually have to grapple with the end of a cycle — even if load growth means that this era of grid upgrades ends up being what Reddy calls a “super cycle” of 15 years or so.)
In the longer term, the company’s plan to stay relevant will require it to expand beyond inverters and switchgear, Reddy explained. That’s largely why Ayr’s founders opted to seek venture capital funding over the debt or private equity funding that’s more traditional for large manufacturing efforts.
“Our aspiration is not just to build a traditional OEM that’s more nimble,” he said. “We saw a lot of white spaces where new technology can be developed and should be developed…that risk capital was necessary to take some of those bets as we progress.”
