Disruptive innovation and the traditional energy company

Welcome to the latest DNV GL Talks Energy podcast series, recorded live at the Singapore International Energy Week (SIEW) 2018. Each week, notable industry thought leaders join us to discuss the hot topics from SIEW and provide their insights into the main drivers behind the global energy transition.

Disruptive innovation and the traditional energy company

Disruptive innovation and the traditional energy company

In a landscape defined by disruptors, what is the role of an energy company with a heritage in traditional energies? Wouter van Wersch, Vice President of General Electric (GE), looks at how they fit into the changing energy world, and considers the specific needs of Southeast Asia.

In this insightful episode, we discuss the progress of the energy transition in the ASEAN region and GE’s role in developing the infrastructure needed to meet the region’s huge demand for electricity. With its mix of markets from the mature to those where millions have no electricity, Wouter outlines the pressing need for improved infrastructure in Asia, where investment is needed not only in generation but also transmission and new technology. He describes how smart data can reduce the environmental impact of traditional energy sources deployed alongside renewables. Finally, he highlights how governments in the region can support variable grids and other elements of the energy transition through the introduction of incentives and new regulatory frameworks.

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Wouter van Wersch GE
Wouter van Wersch, VP of General Electric
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NARRATOR Welcome to the DNV GL Talks Energy podcast series. Electrification, rise of renewables and new technologies supported by more data and IT systems are transforming the power system. Join us each week as we discuss these changes with guests from around the industry.  

MATHIAS STECK Welcome to a new episode of DNV GL Talks Energy. My guest today is Wouter van Wersch, President and CEO of GE Asia Pacific, and Vice President,GE. Welcome, Wouter. 

WOUTER VAN WERSCH Hi.

MATHIAS STECK What we want to discuss today is basically the transition around us on a technology level, but also on an energy level. So, we have an energy transition ahead, but technologies like digitalization and related matters are also giving us transition on technology, and we want to discuss a little bit, GE’s role in this environment. But before we go there, it would be great if you could introduce yourself as a person, as well as your role in GE, and your part of GE you’re looking after.

WOUTER VAN WERSCH Okay, great thank you for inviting me here. So yes, I'm from Holland, and actually I've been working in a number of companies over my career. In total, I spent about 15 years working in and around, and for Asia, and now I'm back… eight years actually in Singapore, where I started… actually, I came from Alstom, the French engineering company, and when Alstom got acquired by GE, I joined GE, and I'm now the President CEO for the Asia Pacific region, covering the whole of the GE Group, so all the different activities.  

MATHIAS STECK Right, very good. We are recording here at the site of SIEW, I’ll come back to this later, but the topic we have here to discuss at this event is invest, innovate and integrate, and I would be interested how you see this, how well this is going, looking at these transitions globally, but especially also for your region here in ASEAN.

WOUTER VAN WERSCH So look, I think ASEAN, if you look at it from an energy perspective, there’s a huge demand. Every single country still needs to buy and build a lot of equipment to generate more electricity. So, the timing of this SIEW is I think great, and all the discussions that are taking place are really spot-on, bringing together the industry players, and discussing together, okay, how are we going to proceed? ASEAN needs a lot of different things I would say. So, first of all, in terms of electricity, there’s a big mix that is needed, countries need to invest in the generation, but not only in the generation, also in the transmission; because when you produce electricity, you need to bring it to the users, and I think there’s still a big deficit in terms of the distribution networks around the region. But that of course is one of the big topics that’s also being discussed. Besides this, of course, innovation and bringing new technologies are also key, and digital has been discussed a lot, and will bring a lot of positives for the markets actually in terms of the generation.

MATHIAS STECK You just mentioned innovation, new technologies, digitalization. This is going around in every conference we are going to these days, and there’s a lot of hype about new stuff coming, start-ups being there, and I have a two-fold question there for you also, linking back to GE’s history. 

GE has a huge heritage, 1892 founded, is one of the largest players in that field in the world. The questions are going in two directions. Number one is how does GE, by having so many disruptors, maybe, around, still drive a major part of the innovation we see? Or let me better say, companies like GE, so it’s a bit like corporate innovation, what role does it play in these days? But then also, interestingly, through such a long time so many changes in technology, with so many changes in the economy and what are the pain points; how do you renew yourself as GE, as such an industry giant, to stay relevant?

WOUTER VAN WERSCH So, that’s a very good question. It’s one of the key pillars I think, of the fact that GE has been around for 127 years. So, we are constantly reviewing the way we work, we’re constantly reviewing what’s happening around us, and deciding if what we do is relevant or not. We have also been instrumental in launching new activities and launching fundamentally new industries. So, that’s something that’s in the DNA; people know it, we are constantly looking at what’s happening outside, and trying to learn and to see the opportunities. 

So, if I look at the power generation field, of course historically, GE is a great big player in terms of the gas business, gas power generation and wind. When we acquired Alstom we also get back quite heavily in hydro, also in coal generation. And now as a company, we work on gradually improving the existing technologies we have: being constantly more efficient, having better equipment, being able to generate more power for our users. But at the same times, we’re leveraging the new technologies.

So, we discussed about digital recently, we launched our digital strategy about seven years ago, and since, we have developed a whole operating system, really focusing on the industrial Internet of Things, and we are using this to capture data coming from all the equipment we have around the world. The terabytes of data, capturing them, analyzing them, making sense of them, and afterwards, providing information to the users, to the utilities around the world; how they can make better use of their equipment. We’re doing this in the electricity power market, but we’re also doing that of course with our jet engines in the aviation space, or in healthcare. So, across all the activities, we leverage digital and make this big added value on improving performance. 

Maybe a second pillar that’s also quite interesting, we’ve also invested heavily in additive manufacturing recently, 3D printing, which is a big revolution in terms of all the manufacturing industries. So, it does touch [of] a lot our industries, but it also touches the automotive, and I think there are probably not many industries that are not touched by this. The idea is simple; in the past we used to cast equipment, now we are printing it. So, our fuel nozzles, a very strategic piece in the gas turbine, is now printed, which enables you to provide stronger, lighter equipment that needs less maintenance in the long run, but it also helps you to innovate more because in the past you would develop a new piece of equipment, this would take months, and then you start to test it, which will take again some time. Now, we can simply, using 3D printers, we print it, and within a couple of days you can test the piece of equipment. So, I think that’s another big change and revolution in the manufacturing world – the additive world.

MATHIAS STECK That’s a really interesting feat, and maybe taking that as a benefit now, and having you here talking about this, this is a question for this. We are discussing inside DNV GL as well, what is our role in additive manufacturing, and then we try to understand a little bit how that will reshape maybe the manufacturing arms of the OEM business. I think two questions are there, where we thought it would be interesting to find out what happens there. So, one part is, there’s a lot of money made by doing maintenance or providing spare parts to equipment, but if suddenly everybody can print it, how do OEMs handle that situation? Is it at all something which we will see happening? Then, another interesting part is how do we keep IP of designs, because suddenly they are digital, and they might roam around on servers, or whatever, are approachable. But what is the easy answer to this, or what is your answer to this, I should say?

WOUTER VAN WERSCH Look, it’s indeed a very interesting question because especially the cannibalizing of the maintenance revenues, because this is fundamentally what’s happening. So, this will happen, but as GE we’re not going to fight against this, this is the way to go. So, either you embark on this revolution or you don't, and we’ve definitely decided that this is the only way to go. So, yes, there will be less maintenance, it will be easier to generate or to produce spare parts on the location, and you won't have to take equipment, bring it to a faraway place. So, it will have actually a very positive impact also on the environment, because there will be less transport. So, there are a lot of aspects which are very good. So, we’ve fully embarked on this, and the fact that it will reduce the maintenance.

Now, to come to your second question, our customers still need to have 100% reliable equipment. So, having a pirate printing a piece of equipment, that will be put in a gas turbine, or in a jet engine, and therefore, actually ending the warranty that the OEM gives. I don't think that customers will take that risk, so, it will ultimately help them on the maintenance cycle, but they will, I think, continue to go with the OEMs because they are the ones that master their equipment, and have of course all the drawings. So, I don't see a big risk on this.

MATHIAS STECK Right, thank you. I’ll try to tie us back to the energy revolution now. We have talked about the digital revolution, now we talked about the manufacturing revolution, which wasn’t the plan, the way we did it. Now, we talk about the energy transformation. So, DNV GL has issued an Energy Transition Outlook, it’s looking ahead to 2050, and one interesting thing we see is there’s a lot of development going on in this part of the work. ASEAN, but also especially India and China, massive upbuild of the grid, massive deployment of renewables. And also GE, obviously, has some focus on this region because GE has created a new Asia Pacific region, which you are responsible for. So, I would like to hear a bit about your view about the potential of this region with regards to the energy transition.

WOUTER VAN WERSCH So look, I think APAC is a great region, and if you look across all the different countries there’s great potential. Of course, it’s very different, you’ve got very mature markets like Japan, Korea, Australia, Singapore, where we are today; and you have countries that need everything, Laos, Cambodia, Myanmar. So, there are really different speeds, and different requirements. But globally speaking, there’s a big need for more infrastructure, and I think it all starts with electricity actually, because without power, you can't do much anymore nowadays, it’s really become a basic right actually for everybody. In ASEAN, there are still 65 million people that don't have access to this basic right. So, I'm very bullish, we’ve been here, as you mentioned, for a long time, we started actually in the Philippines, when we brought electricity to the Real Street, this was the start of GE in the region. And ever since, we've been there to build out the infrastructure with a lot of people, 16,000 employees, all across the region. Present in every country. 

So, yes, I'm always very bullish on the region, and even if the world around us is maybe nowadays a bit shaky, I'm very hopeful, and the SIEW was a good example, when you bring the key stakeholders together, like you had all the ministers of energy at the events, they all have the same goals. They need to of course get a lot of agreement because ASEAN is a region, but still needs a lot more cooperation, but I think that events like SIEW are great to bring people together, and to get everybody aligned on what is needed in a region.

MATHIAS STECK Staying in the region, I think we also hear from this region, going back to COP 21 maybe, a lot of agreement that people are concerned about climate change; things have to happen to mitigate it, or slow it down. But then on the other hand, when we look into the primary energy demand of ASEAN, it’s peaking ten years behind the global primary energy demand peaking. So, there’s still some coal going online in the region, we are not quite there on that path to really have the energy transition in some of the countries, but what do you think, what is your view on this development? What are maybe potential, let’s say accelerators, to move faster, even in this region, also to prevent maybe having stranded assets standing, like a coal power plant which is only operating for ten years and then goes offline?

WOUTER VAN WERSCH So look, there are a lot of things happening. I firmly believe in energy mix. At this moment, there’s a strong push for renewables, I think that’s definitely the way to go. More winds, more solar, more hydro, if it’s done of course in the right way. That’s where the future is heading, and also this region is going into this direction. But as we mentioned earlier on, there’s still a lot of electricity needed, and you need baseload. So, there’s a clear role to play for gas turbines, and there are a lot of new gas plants that got build around the region, and even coal at this moment, there will be new coal builds in ASEAN for the foreseeable next five to ten years, because simply, there’s certainly still a lot of need from electricity. 

So, if I look at the transition that’s happening – more renewables, more decentralized power generation, I think that’s one of the major challenges actually that we have to address. We discussed about the grid earlier on, we need to have the right grid to be able to cope with this distributed power. We need a smarter grid. We have a number of initiatives on smart grids in the region, and definitely that’s another aspect on where to go. Then one other one which we are focusing on a lot is you have a big installed base of power generation, the installed base is much linked to coal, and I think we can have a very positive impact on the environment, by addressing the installed base, by upgrading, retrofitting, bringing the latest technology to these power plants. It will have actually a very strong impact on reducing the emissions of the traditional pollutants, but also of CO2 in the region. 

In this whole energy transition, stakeholders like governments have a key role to play. If you look at what’s happened in other parts of the world, like in Europe or the US, new industries, like renewables, have been kickstarted through feed-in tariffs, for example. So, if you look at Asia at this moment, and especially with the countries that have put in place the feed-in tariffs, this has had a tremendous impact on the development of wind, for example, in Australia, or in Thailand, or in Vietnam, for example. So, I think governments need to put in place the right environments, sometimes the right incentives, in order to get industry starting. I think that’s what’s happening now in ASEAN, governments do realise this, and they’re taking the right steps.

MATHIAS STECK Great. Wouter, unfortunately, we are coming to slowly to the end of this episode already, but I have one last question for you. What is your main takeaway of the Singapore International Energy Week this year?

WOUTER VAN WERSCH Look, I think my main takeaway is the fact that the industry as a whole, the whole energy ecosystem in the region, is starting to really discuss together much more actively than what I've seen over the last seven, eight years since I'm in Singapore. Everybody is conscious that we need to take actions, everybody is conscious that ASEAN needs to be a unified region, that we need to address the energy opportunities as a region, all together, and I think that was really my main takeaway. The other one would be on the balanced mix of energy, the fact that renewables is really growing, and that everybody really is strongly supporting this, but that you will still need a lot of gas, and potentially, as I mentioned, some coal to be successful, and to bring the electricity that is needed.

MATHIAS STECK Thank you very much, Wouter, for your interesting insights. That was Wouter van Wersch, President and CEO of GE Asia Pacific, and Vice President GE.

NARRATOR    Thank you for listening to this DNV GL Talks Energy podcast. To hear more podcasts in the series, please visit dnvgl.com/talksenergy.