Recently harmonics flowing into power system is increasing as the usage of semiconductor equipments and switching mode power equipments are increasing. Harmonics cause problems such as heat increasing and reduction in capacity of transformers, especially the harmonics flowing into a distribution transformer can lead to the lifetime reduction of transformer. In this paper, we are about to develop a device that can monitor harmonics in real-time as it is affixed to a distribution transformer. Unlike the existing expensive harmonic analysis device, a new harmonic analysis algorithm is proposed in order to implement low-cost equipment. The real-time harmonic analysis algorithm proposed in this paper allows implementation on low performance microcontrollers, thus it can monitor the harmonic in real-time as it is individually affixed to the transformer. Therefore, it would improve the reliability of the transformer and stable power system operation would be possible as it can prevent the transformer accidents in advance.