"Utilities Need to Find New Revenue Streams and Business Models"
The Switzerland-headquartered Hitachi ABB Power Grids is a global technology player serving utility, industry and infrastructure companies in emerging areas such as sustainable mobility, smart cities, energy storage and data centres. The $10 billion company started operations in India in July 2020 after Hitachi's acquisition of ABB Ltd's powergrid business in 2018. Global CEO of Hitachi ABB Power Grids, Claudio Facchin, and N. Venu, Managing Director, Hitachi ABB Power Grids India, talk to Rajeev Dubey and P.B. Jayakumar about technological changes in the power sector and how they are helping countries meet their zero carbon targets. Edited excerpts
How has life changed for companies as countries move towards renewables and fossil fuel prices rise again?
Claudio: If we set aside for a moment the hike in fossil fuel prices, the pandemic and the crisis we are managing, we had invested in this transformation a few years ago. Our partners, customers and other stakeholders in this industry are going through a tremendous transformation, driven by rising penetration of renewables. Certainly, the drive is stronger now than a few years ago, thanks to the need for de-carbonising. Electrification is becoming more and more the centre-piece of this transition. We saw it coming a few years back. Increase in share of renewables and enabling technologies will make electricity the main source of energy. We will need more efficient ways to distribute electricity.
At the same time, the electrification drive and new ways of generating energy have brought new generation and consumption players. Of course, we have to play a key role as a global leader, from making sure that our technology enables integration of renewables to ensuring the best use of that electricity. For example, prolification of electrical vehicles is a big change. Same is the case with data centres. Going forward, every country, including India, is going to invest in building its own capacity in data centres, servers and associated digitalisation with IoT and so on.
We need to leverage technology to make sure that power generation, transmission, distribution and consumption are optimised and made even more resilient and stable. The pandemic has accelerated technology adoption. We do not see, nor do we expect, any change in the course of this transformation. The main trajectory is set and more and more countries are committing to carbon neutrality. Electricity is the backbone of these de-carbonising efforts. At the centre of that transformation, as a technology and market leader, we have to play a key role.
Which is the most demanding industry in this transition?
Claudio: It starts with our customers. Utilities need to improve generation and distribution of electricity. They need to find new revenue streams and business models. There is also substantial transformation going on in the traditional oil and gas industry. There are also more technology and investment opportunities in renewables and electrification and new technologies in chemical and petrochemical sectors as well as in generation of electricity from fossil fuels. We understand the needs of our new as well as traditional customers and what technology is required in this transformation.
How do you assess the level of new technologies being deployed at a time when India is moving from coal to renewable power? Are transmission and distribution utilities adopting them?
Claudio: We have been communicating with our customers about available technologies. There are a lot of technologies across the spectrum - supporting interconnections, backbone for transmission, renewable energy integration, next generation HVDC (high voltage direct current) and technologies to improve quality and delivery of electricity. A lot has been done to deliver reliability and quality resilience even at the edge of the grid. Then there are micro grids, battery storage in local communities, in local industry hubs, etc. Digitalisation has been evolving fast over the last few years. We have been driving digitalisation of the grid. Also, data from a transformer can now be remotely and centrally assessed for better grid management.
I would add one point here. Globally, this trend is catching on in most markets, though these markets are in different stages of maturity. Venu will provide the India perspective.
Venu: Technology is available globally. We have already deployed it in India. I will give you an example. The North East to Agra HVDC line, or the power super highway, that we built carries close to 6GW power over 1,800 kilometres. This has been deployed with a multi-terminal high-voltage DC technology, used for the first time in India and rarely in the world. India's vision is to connect to South-East Asia and Oman. These technologies can help in interconnection within and across countries.
The Indian situation is different from other developed countries, where generation, distribution and transmission are with the private sector. As a global CEO interacting with various governments and private utilities in numerous countries, how do you assess the situation in India and the opportunities for you?
Claudio: As we mentioned in case of the above innovation (power super highway), collaborations have to happen among different governments, stakeholders and utilities. We need to innovate in terms of policy and regulatory initiatives to be able to deploy technology. For that, we also have a duty to share with global leaders what technology can we offer to policy makers and regulators and help them define the next level of policy so that it is in sync with what technology can do going forward.
It goes without saying that there is no way for us to reach carbon neutrality by 2050 without everyone contributing. The key is to find the best ways to have every stakeholder contribute and collaborate. As the leading technology provider, we also promote these collaborations and are driving the same agenda in India and other markets.
Venu: Close to 90 per cent last-mile connectivity in India is owned by government-run discoms. The good part is that the government, in the last Budget, proposed to give consumers an option to change their electricity provider like they change their mobile service provider. This will bring more quality, reliability and carbon neutrality. Claudio: India is a market for the electricity value chain. Customers here understand technology and what it can do. But we also have to deal with the complexity of the Indian market, territorial issues, complexity of connections, availability of renewable resources not necessarily at consumption points. These teach us how technology can be further developed. Those learnings can be deployed outside India.
You have a wide portfolio with the ABB merger. How do you find the opportunities in India?
Claudio: There is no doubt that we have been able to open a new series of services and markets. Of course, because of the shift in use of electricity in many sectors, the merger brings us opportunities. Take the IT sector. Hitachi has a multi-billion dollar IT business globally. Transportation is another. Hitachi is very relevant in mobility, rail and other areas. We are right at the centre of integrating and electrifying. All of these are relevant and applicable to the Indian market.
Venu: The biggest opportunity for us may be in renewables where the target is 450 GW by 2030. India has been adding 10 GW over the last two-three years. We have to add three-four times of that to reach the target. The rise in penetration of renewables will mean more demand for storage and better quality power. The second area is transportation. The government of India is targeting 100 per cent electrification of the entire rail network. So, our infrastructure portfolio has opportunities there. Every second Shatabdi train uses our transformers for reliable power. Nine out of ten metro stations are powered by our SCADA systems. Then, in India, we have some two million buses, and a trend towards making them electric. We have a technology called Grid Emotion Flash Charging that helps buses get most of the charging done while people are boarding and de-boarding the bus. We have signed an MoU with IIT-Madras and Ashok Leyland to deploy this technology in India. Data centre is another opportunity.
Claudio: The largest number of Hitachi ABB Powergrid employees are in India. Half of those support businesses outside India. About 80 per cent of what we produce here is sourced locally. In some technologies, in terms of localisation, we are ahead of many other countries, while in others, we have to some catching up to do. We also have a unique asset in India, a global engineering centre, which also does research and development (R&D). We started that journey over ten years ago. Over 1,000 engineers support R&D and execution for systems, products and factories in over 40 countries.
Going forward, what kind of investments are you looking at in India considering the potential you see here?
Venu: India is a key market for us from demand as well as supply point of view. We use our footprint here for meeting local as well export demand. We see India as a strategic market and keep investing here on a regular basis.
@rajeevdubey; @pb_pbjayan
