Just six months after taking the helm, new CEO Scott Strazik sees plenty of room for optimism about the future for GE Power Services and believes that Europe is the ideal proving ground to demonstrate why
Scott Strazik has been with GE for 18 years, starting in the company’s Finance unit, then Aircraft, before moving to Power where he has been for five years, first as Chief Financial Officer before taking up his current leadership role in October.
It’s a daunting role, with profit in the power division down 88 per cent in the final quarter of 2017, and job loss announcements indicating a move towards a leaner approach to the sector.
However, Strazik says his team is working hard in consultation with its customer base, and he told Power Engineering International he is excited about prospects for the year ahead.
Europe has been a ghost town for gas turbine manufacturers for much of the last decade – but this is exactly where the company is producing a push in 2018. This month GE Power Services signed a milestone agreement with Edison, part of Electricité de France (EDF Group) and Italy’s second largest integrated energy company, to enhance performance at its Candela combined-cycle power station in Puglia. The Italian government’s adoption of a capacity market system has facilitated the project and may well encourage more.
The deal encompasses hardware upgrades to the existing GE 9F.03 gas turbine, increasing both the plant’s output to 400 MW and its global efficiency by about one percentage point. The deal also incorporates GE’s predictive maintenance software and cybersecurity solution improving asset visibility, reliability and security, while decreasing operating and maintenance costs at the plant. It’s a first of a kind implementation in southern Europe.
Strazik spoke with Diarmaid Williams about the future for GE’s gas turbines in terms of both technology development and global distribution.
Q: With fossil fuels currently accounting for 81 per cent of the world’s energy mix, not much has changed in three decades. Gas grew 3 per cent last year and coal 1 per cent, yet the power business is suffering. How do you plan a strategy in the face of a growing influence of distributed and renewable energy?
A: Fossils continue to play as material a role as they have. I don’t know if it’s the volatility in our financials or in the market at large, but it is one at which it’s not a very manageable environment to plan for. Yes, we’ve seen a very evolving grid dynamic, and you’re sitting in one of the more interesting markets in Europe.
In trying to navigate the changing landscape, even when I look at places like Europe that are probably the furthest along in the evolution of renewables growth, I look at our business and the fit we have within the grid and I feel good about it. Yes, we have probably a half decade of renewables growth, half a decade of anaemic industrial growth in Europe and not always the best government policy – but I look at our business today and the utilization rates in the fleet seem to be levelling off and some markets growing for the first time in a while.
I look at where we are with customer need in Europe, and output isn’t necessarily the biggest criterion for demand. I look at the need for efficiency and with still reasonably high gas prices the need for more ramping capability with our gas turbines.
We feel like we can navigate our new products for the next five years in a smart and confident way. I talk a lot about Europe with the customers and the team because I feel if we can navigate Europe we will be able to navigate a lot of the markets where we are competing and serving customers.
There is still a lot of opportunity out there for us to serve our customers and play a vital role in the market and I don’t see that changing any time soon.
Q: How much of what GE Power Services does has to be worked out in cooperation with what GE Renewables and GE Distributed Energy are doing? Particularly in Europe, it seems that distributed power and renewable power have the whip hand. In markets like that, what is the approach? Is there a certain amount of coordination?
A: There is. Today is not a bad illustration of that, in that I am spending the day at our Global Research Centre with our energy research centre team, but also with the leadership teams of our various energy businesses such as gas, wind and other renewables, talking about where we are going with our technologies.
We also have leadership from our aircraft engines business spending the day with us, for that matter. They are invested in material science and how that technology can help our gas turbines.
We are talking more about the holistic value within the energy system and what we can do to play together, and I think you will see more and more coordination. In some ways you’re already starting to see that when you see us launching our energy reservoir and talking about how we are going to combine storage with some of our smaller gas turbines.
I think that the next step of evolution is how we add wind turbines into a combined solution, and that day will come without question. It’s the next chapter.
Q: With the digital aspect, the quality of equipment, efficiencies being produced and emissions reductions achieved, GE’s gas power offerings have never looked stronger despite the challenging nature of the market at the moment. How much of a positive contribution can GE Power make to global emission reduction by rolling out its current gas-fired offerings?
A: I think about it almost in three categories. You have to look at it in terms of where our new HA machines are going and where they are usually replacing existing power. In the US, for example, they are replacing coal plants and in places like Taiwan, Japan and Korea they are replacing a lot of nuclear capability.
You have that high efficiency play that, to a large extent, is replacing other forms of baseload technology that’s ultimately good for the environment and good for the grid. That’s one part of how we can contribute.
The other part is frankly being an effective complement to the growth of renewables, because someone is going to have to continue to support the levelized nature of an unpredictable fuel source and gas is perfect for that. I look at our new unit growth on the high efficiency side and there is a one-for-one, very explicit value between gas in/coal and nuclear out.
Maybe a less direct connection, but a very real is one where gas is going to continue to be a better complement and enabler for renewables to grow and a levelizer for grids all over the world. And, depending on where we are on renewables penetration growth, that will vary drastically with how quickly gas is playing that levelizer. It’s less relevant when it’s the first 5 per cent of the grid that’s coming from renewables, but it’s very relevant when its 15 to 20 to 25 per cent.
Q: Speaking to GE executives last year, there was a great belief that clean coal power must remain at the top of the agenda, as developing nations keen to use their resource would otherwise choose to develop more polluting plants. Is this still the position for the steam business, and do you think there is enough awareness out there about what GE can do to mitigate the extent of global emissions?
A: No question. I would say the drivers there are economics, depending on the costs of coal and which part of the world in terms of the environmental dynamic. There is also the fact that no matter where you are geographically, our customers want that diversification mix.
So, you do continue to see some level of new coal build taking place. Admittedly is not happening in the most developed countries in the world. But even in the US, depending on what part of the US you are in, very large utilities in some parts of the country expect to retire coal power in the coming years and decades but continue to see it as relevant central part of their grid mix. We look at our steam business and still see a very valuable franchise both for us and for the market at large, and one we are going to continue to protect and nurture.
Q: Despite the challenging environment the power division has had to contend with in recent years, and the impact on bottom line, the unit still has a lot to offer, though in perhaps a leaner, more organizationally flexible guise. How do you see it evolving?
A: I would certainly say we have a portfolio of offerings that can support a lot of the challenges we see in the world today.
Specific to gas, I think there are areas of the business we can run better and execute to serve customers in a more efficient way. When I take a step back and look at all we have taken on over the last 24-plus months, the Alstom acquisition really changed the portfolio of offerings for our teams in the field.
Our aero-derivatives business historically was a standalone independent organization within power that we integrated within our gas business. In that context, we’ve taken in a lot of solutions and, in the process, there are some things we could have executed better.
A lot of what we are talking abut in terms of 2018 is a back-to-basics story of executing as a very efficient, focused-flow business that can serve our customers the best we can. There is very little that I see in the challenges that our customers are facing that intimidates me, or that doesn’t make me think we can’t solve their problems. We just have to lean forward and
Q: Does it take long to achieve the kind of new cohesion you are seeking?
A: I feel we are building quite a bit of momentum although I am just six months in. We also have the benefit from the foundation that was already there, and I think this is the year that we get there.
I feel there is no reason why we can’t walk into 2019 with a level of mojo on how we are performing in the fleet and innovating in new and different ways, using the toolkit of opportunities we have. We need to go out there and prove it for the customers to ultimately reinforce how they do business with us. It’s there for the taking, and this is not in any way a business or a marketplace that is anything other than encouraging for me.
Q: One of the drivers for GE is to help more populations gain access to electricity – we note your recent gas power project in Angola for example. When addressing similar markets out there for your gas power portfolio and helping to power more communities like that, how much of a competitor are renewables or hybrid technologies?
A: There are a lot of parts of the world that still need faster distributed power. This is particularly true for parts of the world that don’t have electricity 24 hours a day. But there are also the regions that have the biggest credit challenges.
A lot of the challenge involves keeping the whole of the solution together. That’s not just the gas turbine technology but helping to link these solutions with the fuel base, with the gas turbine, with the financing solution. It takes time and Angola is a case in point, taking 24 months to ultimately deliver that total solution.
In Southeast Asia, sub-Saharan Africa and small pockets of Latin America there are real opportunities very analogous to Angola that we’re working very hard to attract. They tend to take time because you are not just delivering a technology solution, you are offering fuel and financing in parallel.
In places like Indonesia where we have done similar projects in the last few years there is not just a need to power homes but there is also some level of industrial demand. With the economic growth that they are looking for, there is a requirement to have reliable power and they are not going to be relying on hybrid and renewable for that, at least not in the near future.
Some of our aero-derivative solutions are very well-fitting because they are very power dense – we’ll often take the technology of aircraft engines for our power solutions. They don’t take up a lot of space but ultimately can generate 30+ MW of power – more than the size of a village. It helps to facilitate economic growth with reliable electricity.
Places like Nigeria, Ghana and Indonesia are not just wanting the lights on. They have a base of economic opportunity needing reliability of power that our space dense gas solutions are likely a better fit in the near term to solar and battery. These may work in a small village but will not necessarily drive a lot of economic growth. With these Angola-style solutions, we can be a catalyst for economic growth.
Q: Have the benefits of your Predix technology helped in attracting more interest in the overall power offering, in terms of bottom line and efficiency gains?
A: At the end of the day our biggest asset by far is the data we have. We’ve got a 7400 MW gas turbine installed base that is pumping out an immense amount of data every day.
To be honest, when we look at how our fleet is run by our customers, we think we can help them run it a lot more efficiently and help them normalize a more complicated and dynamic grid with our digital solutions in a very real and meaningful way.
I feel like we are still in our early innings in how we use that data, not just in a reactive way but in a very proactive real time way that maximizes the efficiency of the machine utilizing gas. We’re just beginning to make sense of how we really create that value and help our customers support their business environment and ultimately make more money.
Diarmaid Williams is International Digital Editor of PEi