The global power technology sector is on a bull run as countries like Canada step-up plans to decarbonize their electricity grids with vast volumes of renewable energy generation to meet climate action targets.
But behind the scenes, this is putting enormous strains on supply chains around the world and presenting a serious challenge for the industry making the high-voltage systems and equipment needed to produce, store and distribute energy, said Andreas Schierenbeck, the new CEO of Hitachi Energy, the world’s biggest power technology company.
"The whole of our industry is coming out of a long period of — not stagnancy but certainly slow growth — and this puts a lot of stress on nearly every company involved in the supply chain," he said, speaking to Canada’s National Observer during a visit to the company’s Quebec operations amid a multi-hundred million dollar modernization upgrade.
"No one in the sector really saw how big a jump in demand was coming with decarbonization and electrification," Schierenbeck said, pointing to the unprecedented surge in power needs for everything from industrial plants and data centres to electric vehicles.
"So mostly it is a matter of coping with the pace of demand growth. This fact has changed the trajectory of our company and everyone else in our sector," he said, referring to an order book brimming with $13 billion in new contracts last year, and around 15 per cent annual growth.
The revolution underway in the global energy system is reflected clearly in Canada’s decarbonization plans, with widespread electrification of industry, homes and cars on track to double or even triple electricity generation by 2050. At the same time, provinces and territories are moving to decarbonize their grids by 2035 in line with upcoming Clean Electricity Regulations.
Schierenbeck, 58, stepped into the top job in July at Hitachi Energy, a unit of the century-old Japanese conglomerate Hitachi, a brand name synonymous with personal electronics and home appliances to most consumers, but best known in industrial circles as a major player in the international energy, industrial and manufacturing sectors.
"No one in the sector really saw how big a jump in demand was coming with decarbonization and electrification."
Ironically, the recently installed CEO wasn't planning for a career in engineering. Though his CV includes successful stretches with German industrial giants including Siemens, Uniper, and ThyssenKrupp, Schierenbeck entered university aiming to study IT.
"My academic advisor — and this was in the former East Germany — said: 'We have enough computer science students. I suggest you study electro-technical engineering.' So I took this path — though I kept taking IT courses," smiled Schierenbeck.
Multi-billion-dollar expansion plan
Schierenbeck joins Hitachi Energy, which employs over 45,000 people in 60 countries, as it plans to double its global energy transition investments. Some US$4.5 billion ($6.25 billion) is being injected into its manufacturing, engineering, digital, and research and development (R&D) divisions, and an additional $1.5 billion to ramp up transformer production worldwide.
In Canada, $140 million, matched by government financial support, is being invested to modernize its Varennes factory near Montreal, along with other high-tech facilities, including a state-of-the-art R&D simulation centre that designs, models and tests the high-voltage direct current (HVDC) systems needed to integrate large-scale renewable electricity into power grids.
The Varennes manufacturing facility, which makes the huge power transformers and converter stations essential for transmission networks and energy projects, is currently working on delivering its biggest contract in Canada to date: the US$6 billion Champlain Hudson Power Express being built by Transmission Developers, owned by US investment giant Blackstone, and Hydro-Quebec.
The converter station Hitachi Energy will supply is at the heart of the nearly 600 kms HVDC transmission line linking the Quebec power grid to the network in the U.S. state of New York, carrying electricity to one million New York City homes when it switches on in 2026.
"HVDC is tremendous for balancing power over long distances between load centres," Schierenbeck said, noting a second transmission line between Quebec and New York to send surplus wind power from the U.S. state north to Quebec during the winter when demand for hydroelectric power is high in Canada would make sense in the future.
Hitachi Energy’s HVDC technology has been used in its industrial converter stations in Canada since the 2017 Maritime Link Project, a 500-megawatt line linking Newfoundland and Labrador to Nova Scotia and the North American grid. The stations convert electricity from alternating current to direct current for transmission through power lines.
The company has also collaborated on solar-powered microgrids in remote First Nations communities that until now relied on diesel generators for power. Two projects, one in Fort Chipewyan, Alberta, and another in the Yukon community of Old Crow, have resulted in a drop of almost one million litres of diesel used per year, and lower CO2 emissions and power costs.
"Dark doldrums"
Central to the operation of future clean power transmission systems around the world will be how to handle the ever-larger volumes of variable renewable energy flowing onto the grid. Energy storage technologies to “balance” and “smooth” delivery in the coming decades will be key, Schierenbeck said.
A broad spectrum of technology, ranging from batteries with short, one- to four-hour charge-discharge cycles, to as yet uncommercial long duration concepts, will be needed to stabilize lengthier production fluctuations from renewable sources, he believes.
"I am still somewhat skeptical about many of these newer technologies," Schierenbeck said.
Schierenbeck references the infamous dunkelflaute, a yearly weather phenomenon in Germany often translated as "dark doldrums" featuring low winds and overcast skies that put wind and solar power at a disadvantage. Managing this, he said, was instructive in planning for a future renewables-fuelled world.
The German transmission system operator can't plan how to run a clean power based grid 24/7/365 based on the dunkelflaute, he said, "it's only five or six weeks a year."
"With renewables, dealing with this variability means connecting storage makes a great deal of sense. It will win on cost efficiency," he said.
The tumultuous years since the Covid pandemic, with Russia's invasion of Ukraine and now military turmoil in the Middle East, have accelerated the energy transition, said Schierenbeck.
"Focus on the 'energy triangle' — affordability, security and reliability — definitely has had a big boost due to the geopolitical situation," he said.
"There is no question that renewables are the answer," said Schierenbeck, adding: "the limiting factors, wherever you are, are the political will, permitting, and finding compromises with industry and the public to make the necessary infrastructure build-out much faster."
Comments
The Canadian Prairies, especially Alberta, also suffer from "dunkelflautes", with bad ones in 2021 and 2023 - four, five days with almost no wind at the darkest week of the year.
We need a solution for that.