Siemens Energy CEO: New spinoff will focus on R&D, service

Editor’s Note: Galen George, Siemens Energy North America director of marketing and business development, will anchor a POWERGEN+ webcast Tuesday morning on “Adapting Existing Generation for the “New Normal” with Digital Applications.” The free webcast begins at 11:30 a.m. ET Tuesday and will be 45 minutes long. Attendees can ask questions of the presenter. Click here for more information on POWERGEN+ and to register.

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The energy transition is many things. One of those, honestly, is a corporate journey.

Many of the power generation sector’s biggest companies are making big moves, big bets, big hedges as they figure out Destination 2050 is really going to look like. Will renewables dominate? Will gas-fired turbines still lead the generation mix? Will hydrogen ever really happen?

Multi-sector energy giant Siemens is certainly one of those majors which are honing their business plans to be nimble and adaptive. This year it has spun off its power generation equipment and services units into Siemens Energy.

“I’m a big fan of transformation,” said Christian Bruch, who has come over from Linde to be the new CEO of the newly formed Siemens Energy. “We have a great portfolio (but) were not satisfied with the financial performance.”

Bruch spoke with industry media writers in advance of Tuesday’s Capital Market Day with investors. He talked about everything from the future of hydrogen in Siemens gas turbines to wind energy, transmission and, not least of which, natural gas as a transitional leader.

Siemens Energy includes the longtime company’s turbine unit business, long-term service, the Siemens Gamesa wind energy joint venture and T&D technologies. The newest and shiniest rotating equipment is always attention-getting, but long-term relationships and research are where the growth may be.

“Forty percent of revenue today is in the service business,” Bruch said. “It’s great to bring (new) turbines in…(but) we are trying to convert this into long-term service contracts.”

Siemens also is eager to push significant research and development into all kinds of new resources, such as experimenting with hydrogen, scaling up electrolysis capacity needed to produce the H2 in ample quantity, protecting smart grids with state-of-the-art controls and making conventional generation resources more sustainable and efficient.

The company is allocating about 1 billion Euros ($1.2B U.S.) to research annually with 5,000 R&D employees spread across 15 centers globally. The key to success in research is finding like-minded help.

“What we’ve got to focus on is looking toward co-creation with partners,” Bruch said. “Right now less than five percent of our R&D spend comes from the outside. I want to see this go up.”

Some of those joint ventures include work into raising the percentage of hydrogen in gas-fired turbines. Hydrogen does not have a carbon atom so it could be key to decarbonization of the turbine mix.

However, this has been talked about for a while and provides plenty of logistical challenges. Siemens is investing money in “green” hydrogen (in which the electrolysis is powered by clean energy resources like wind or solar) but it must be patient in a long, slow, deliberate march.

“We strongly believe in the future it will be the pillar of the energy industry…but it will be in the future,” Bruch said the trade journalists. “This business will only be successful if we get costs down, which I believe is possible.”

The key goal is decarbonizing the generation sector, so it matters less how you get there. For one thing, Bruch cautioned that no one should write off the importance of natural gas-fired contributions for the distant future.

“Conventional technologies like natural gas will be required going forward, no question,” he said. “The industry has not been vocal enough on what’s needed to get through the energy transition, what’s needed to get us to a more sustainable world.”

It’s not cut and dried, not solely one way or the other.

“Everything renewable is good, everything conventional is bad,” he recited familiar motifs of the energy transition. “This is not a black and white situation.”

Gas-fired turbines and technologies are going to remain huge for Siemens, despite recent years of declines in financial gains on that part of the business. The company’s global backlog for new units is 31 billion Euros ($37B U.S.) and close to 47 billion ($56B) for the service order backlog.

He sees long-term potential for growth in a variety of power generation fronts. Some forecasts indicate that global demand for electricity will grow 50 percent by 2040, and connections are finally made to hundreds of millions of people who currently live without power.

The key question?

“How do we serve a growing demand for electricity with the challenges of climate change?” Bruch offered.

Siemens Energy has operations in 90 countries worldwide.

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