The operating voltages of low-voltage control circuits in power plants and substations have decreased with the installation of digital control equipment. This increases the susceptibility of control equipment to abnormal surges, which arise mainly from lightning. To protect control equipment from lightning, it is necessary to predict lightning surges invading power plants and substations and design effective lightning protection methodologies. Compared with conventional simulation techniques based on circuit theory, full-wave numerical approaches are advantageous in handling three-dimensional structures such as transmission line towers, grounding structures, nonhorizontal wires, such as incoming power lines to power plants and substations, and lightning-induced effects. In this study, to apply the finite-difference time-domain (FDTD) method to the lightning surge analysis of an air-insulated substation, we first propose techniques for simulating the nonlinear breakdown characteristics of short-air-gap arcing horns and transmission line surge arresters installed in 77 kV transmission lines for FDTD-based surge simulations, and compare the breakdown characteristics calculated using the proposed techniques with measured results for validation. Second, as an example of the application of the proposed techniques to practical surge analysis, it is confirmed that we can reproduce the measured results of lightning surges invading a 77 kV air-insulated substation in the case of a direct lightning strike to its nearby transmission line tower by taking into account lightning-induced voltages arising from the lightning current flowing through the lightning channel and transmission line tower, which are commonly ignored in conventional circuit-theory-based simulations, multiphase back-flashover phenomena, and the effect of applied AC voltages.