ABB going big on storage and renewables

pv magazine: At the Capital Markets event, ABB CEO Ulrich Spiesshofer spoke about how the company is targeting “organic growth.” How important is the power conversion business unit that you head for this aim?

Otto Preiss: I believe it is very important. I think our business unit is a hotspot at the intersection of some key impact drivers. These are: increasing electricity demand, urbanization, and IT; the electric energy hunger will be met increasingly by C02-free power generation and low or zero emission transportation. When you look at human-sourced C02 emissions in the world, power generation is the number one. As a result, the top level trend is C02-free power generation. Take the OECD countries as an example: over the next five years 80% of electricity capacity that is being installed will be renewable. So with the growth of electricity [demand] comes the growth of renewables. The second topic is urbanization. The big picture is that you have 50% of the population today in cities. Within 10 to 15 years 10% more people will be living in cities. We will need mass transportation and we will need to fulfill the mobility desire of the people.
Given our challenge to decouple urbanization from emissions increases, both mass transportation and personal mobility require low emission solutions. So there’s clearly a need for electrical mass transportation such as subways, trains, electrical buses, or for electric cars with related e-charging infrastructure.
This is subways, trains, the electrification of trains, electric cars and e-charging infrastructure.
The third point is IT. Let’s take as an example the immense growth of data centers. Cisco is projecting that in the next five years there will be an annual growth rate of 30% in data that needs to be hosted in data centers. If we look at data centers built today, we can be talking 10 or 15 MW power consumption as a starting point. That used to be a small city only a couple of years ago!

So is the conversion systems business one in which ABB is investing?

Absolutely. For instance, e-mobility is catching up but the industry overall will still need investment.

The most recent partnership ABB has announced is with BYD. The goal your CEO announced at the event was that the two companies are to become leaders in battery storage. That is a big goal. Is it too ambitious?

The main motivation is coming from our strategic emphasis on partnerships based on complementary competencies together with the key role and resulting pervasiveness of batteries and the expected scale effects. ABB has large experience and interest in the application of batteries, be it in utility applications,transportation or in the upcoming combination of an EV charger with a PV inverter in households. BYD is very strong and a key player in battery technology, with high volume production. If we can combine ABB’s global reach and manifold applications with the storage technology from BYD, we can go a long way together as a team.
That was the reason why I had the pleasure of meeting BYD’s CEO Mr Wang together with Ulrich Spiesshofer and a small ABB delegation earlier in the year. We looked at possible areas of collaboration in addition to the existing collaboration we have in the form of the BYD/Daimler joint venture (BDNT) to build electric cars, for which we provide the fast chargers.

There is a lot of competition coming into the battery space. Samsung and Tesla are the two grabbing headlines at the moment, but there is a lot of activity across technologies. Does that concern you in light of your goal to become the leader in battery storage?

Competition in general is helpful. Competition and scale are the main reasons why we’re seeing battery prices coming down. Look at 2010, lithium battery storage was at €1,000 (US$1,290) or more per kWh. In 2015, prices will reach less than €400/kWh. In 2020 we will be over €100 and in 2025 we are looking at €100/kWh. If you look into a Tesla, the battery was €60,000 ($77,000) in 2010, and in 2025 it will be €6,000. So a huge hurdle in terms of cost of the car is going down and this is the result of competition.

What stage is ABB’s e-charging project with BYD and Daimler at now?

As we speak, BDNT are starting to roll out production. It is being sold with our wallbox chargers. There is an option for the customer to buy the charger with the car and then they will be installed wherever the customer would like to have a DC fast charger. This could be at home or it could be at the parking lot at the office.

And do you believe that this is the best business model for fast charging infrastructure?

I believe that there is no way around fast charging infrastructure. This is essentially because consumers want the mileage that gives them an increased sense of freedom – like you have with combustion engine cars. That means you need larger batteries.
If the battery is around 60/kWh or more, you will not wait enless hours for your battery to be charged. While DC charging will increasingly gain importance at home too, AC charging might still work; there, customers might accept a charging time of 8 or 9 hours. But they will not accept such charging times for a quick stay at the office or shopping centers. There they would expect fast re-charging times, say 30 minutes or at most one hour.
So with the further increasing size of the battery and decreasing charge times, already a reality with BDNT’s Denza, you will see the move into home fast charging – and that means DC charging.

In terms of rolling out the e-chargers, what synchronicities are there between the production of that equipment and the formerly Power-One inverter production operations in China? And at what stage is the integration of PowerOne into ABB?

It has been pretty much one year since we completed the acquisition. If I look at the integration, I am truly pleased. When I speak to individuals within the two companies you can see the enthusiasm.
We laid out in the integration plan that we will start with the front end. Aside from the immediate sourcing leverage, we wanted to create value through sales first. Our thinking was that as me move through the integration we would get to know each other better.
As we get to know each other better we would learn what to combine as the best of both worlds. Only then would we move into the backend synergy implementation. I’m pleased to say this is precisely what has occurred throughout the first year of integration.
In terms of R&D we have defined a joint roadmap going forward. On the factory side, we have started to use the very efficient production capabilities of the former Power-One factories to produce EV chargers.

And that process is ongoing?

Of course. There is no step function, in terms of switching something on or off. We want to see what is the best of both sides and gain the trust of the individuals within the companies and then move forward.
We’re referring to this as the “power of two”. We want to bring together the best that both companies have to offer, to examine the synergies with open minds and complete trust, and move forward.

What was a step change for ABB Group was the move out of the power systems business, solar and wind EPC. It was described, rather frankly, by your CEO as being a costly enterprise. How much of that was the solar EPC business?

The solar business was part of it. After some time in the solar EPC business, ABB realized that the EPC business was not a core strength of ABB: We are not a construction company. There are companies that are specialized to doing solar EPC business, and master the business very well. We understand our business, the electric business, very well.
The decision to pull out of the solar EPC business was taken in order to de-risk the business. We will now work with partners, to leverage on their strength, and act as a component and a balance of plant provider. So in solar, whenever it is not primarily about “concrete and steel” but about electricity, we will be there

At what stage is that process?

We are no longer quoting on the EPC business anymore. But of course we will deliver the EPC projects that we had committed to.

And does the move out of solar EPC reflect ABB’s opinion of the solar space?

Not at all. We are fully committed to the solar business – look at our acquisitions in the space. If you hear the strategy communicated by CEO Ulrich Spiesshofer and the team, ABB is in renewables. We are a firm believer in solar and all the indications from the market are compelling.