A distribution transformer or service transformer provides the final voltage transformation in the electric power distribution system, stepping down the voltage used in the distribution lines to the level used by the customer. Distribution transformers usually do not operate at full load; they are designed to offer maximum efficiency at lower loads. Voltage regulation in these transformers is kept minimum to improve efficiency. Thus, distribution transformers are designed to have small leakage reactance. Transformers smaller than 500 kVA are generally called distribution transformers. Distribution transformers with voltage distribution less than 33 kV are used in industries, while 380V/220V distribution transformers are used for domestic purposes. The number of customers fed by a single distribution transformer varies depending on the number of customers in an area. Several homes may be fed off a single transformer in urban areas; rural distribution may require one transformer per customer.

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A large commercial or industrial complex would require multiple distribution transformers. Pad mount transformers are used in urban areas and neighborhoods where the primary distribution lines run underground. Distribution transformers are manufactured using a core made from laminations of sheet steel stacked. These are either glued together with resin or banded together with steel straps. Where large numbers of transformers are made to standard designs, a wound C-shaped core is economic to manufacture. A steel strip is wrapped around a former, pressed into shape, and then cut into two c-shaped halves, which are re-assembled on the copper windings.

Formerly, distribution transformers for indoor use would be filled with a polychlorinated biphenyl (PCB) liquid. They have been banned, as these liquids persist in the environment and have adverse effects on animals. Other fire-resistant liquids such as silicones are used where a liquid-filled transformer must be used indoors. Certain vegetable oils have been applied as transformer oil; these have the advantage of a high fire point and are completely biodegradable in the environment. Transformer/distribution polarity is required when there is a need for parallel transformers to gain additional capacity or to hook up three single-phase transformers to make a three-phase bank. The way the connections are made affects angular displacement, phase rotation, and direction of rotation of connected motors. Polarity is also important when hooking up current transformers for relay protection and metering.

The distribution transformer market is segmented based on field of usage (power transformer for transmission network, distribution transformer for distribution network, power supply, isolation, rectifier, and others); number of phases (single phase and multi-phase); installation location (overhead distribution systems, underground or above ground vaults, pad mounts, and interior installation); and region (North America, Latin America, Europe, Middle East & Africa, and Asia Pacific).

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The global distribution market is driven by the increasing need for power across the globe. North America and Europe are the major markets for distribution transformers due to large per capita electricity consumption in these regions. The market in Asia Pacific is poised to gain momentum and outperform North America and Europe in terms of size.

Key players operating in the distribution transformers market include ASEA Brown Boveri, Aston Transformers A.S., Bemag Transformers, BHEL (Bharat Heavy Electricals Ltd), Bowers Electricals, Siemens AG, Crompton Greaves, Daihen Corporation, and Diamond Power Infrastructure Ltd.

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