B (3:23)

We'll come back to electrification in a minute. You talked about we are in kind of expansion mode. What about the resilience? How would you describe energy resilience and is that changing now?

A (3:35)

I think 28th of April, 25 was a bit of a wake up call for many countries. 65 million people in Spain and Portugal were without electricity and power for eight hours. It was a quite a scary situation. I was the day in the south of Spain myself, which I would say quite scary situation, when it started to get dark at night and no electricity. So electricity today is the backbone of every society around the world. And grid resilience is a core. It's no longer nice to have, it's a massive must have. And so it's really part of national security systems today. And that's why also grid stability and grid resilience becomes so much higher on the agenda in every country. You see also how wars are fought today, like in Ukraine where this is how you try to weaken the society is by going after the critical infrastructure like the power grid. It's a definitely a must have these days in any modern society.

B (4:36)

It's good to have electricity. We can't do anything, we can't even do our broadcast without it. But very important. I should just share with my audience here in Boston. We had a big snowstorm a while back and we didn't have power for the whole day because our power lines down. And you can see how your life changes. Right. You just cannot pretty much do anything without electricity. So very important.

A (4:57)

Absolutely.

B (4:58)

So let's talk about. You started to touch on electrification of everything. So can you do that? How far can it go? Do you see any limits to how far electrification can go?

A (5:08)

No, I think for me there is no limits here. As long as we build grid resilience, then most applications today is the cheapest way to operate. And the safest way to operate is with electric motion or with electric propulsion, if that goes into buildings. When I talk about heating, when I talk about everything we're used to today when it comes to light control, a more comfortable Building. It's the one which is with a lot of both automation, but of course of fully electric. And we talk about transportation as well. We see more and more of electric propulsion system that being on trains, on ships, on buses and of course also on vehicles, even on electric vehicles. When it comes to cars even there are, let's say, different adaptation around the world. But if you look at the most efficient way to move things today, it is clearly with electric propulsion system. I think this is a trend that will continue to accelerate as we see in so many countries around the world. And you will see that also in modern industrial production. It's all electric motion, all those conveyor belts that moves things around. This is all with electric motors controlled with drive for higher efficiency. And every electric process I mentioned already, the steel production as one where you're moving from a coal based furnace to an electric furnace, because that is how you drive competitiveness in that industry. And it's valid in every industry today.

B (6:39)

I want to take a little detour, since both of us are engineers, to explain to our audience that the electric motor is much more efficient, isn't it? Because you're not combusting, you're using electricity. That's first from the laws of physics. That's why we want the electricity.

A (6:53)

Yes. And you can also regenerate energy when you're braking, which is how you for instance on trains, when they move into a train stop, instead of burning all the energy in brakes as you would do with a diesel locomotive, with a diesel electric or a full electric train, you can regenerate and put that energy back on the grid or on batteries. So it's how you're able to reduce the fuel consumption, for instance, on a diesel electric train.

B (7:18)

Very good engineering lesson for our audience. So let's talk about automation, which is other big part of what you do in abb. What do you see as the role of automation makes systems more resilient, smarter? Give us a flavor of what you're

A (7:31)

doing in that it is very much making industries more, we call them leaner and cleaner. It's really about making them more productive, more competitive. That is what we can do with automation systems also in our electrical grid to be able to turn on and off big loads using a modern example from your home, where today we are all heating over water heaters. Maybe it runs 24, 7, but more and more we try to reduce those peak hours because in the end our electric grid is big enough to handle in average, more than strong enough to handle everything. And it's a Few hours a day. That is the problem. And even not every day. So here it's all about load management. Bringing it back to our homes is where you don't need to heat the water 24,7 you can do it during the night. That's as long as it's hot water when you wake up in the morning. That's normally works. And this is the same things in industrial world today. It's about using the energy when it's the right time and not to overload the grid. This is where automation comes in. We call this load shedding or load balancing. A big part of our automation is to use the power at the right time. Because this drives efficiency and competitiveness in those industries. And that is all about of course automation is also driving the efficiency of processes. Stronger process control that leads to less waste, higher first pass yield in production that you don't produce scrap but goods that you can sell at full price at the first buying. So this is what drives competitiveness. So there is where automation comes in on the industrial floor.

B (9:12)

And now you're adding AI to the whole thing. How is that going? AI plus automation.

A (9:16)

Yeah, it's really to make that domain know how available for industries that could be a trained service engineer that you can clone as an AI agent and make that AI agent available for instance on a cement plant so that the maintenance engineers and the service engineers at site have access instead of have to call they could have access and get advice from an AI agent that you can have access to. And it's really making that domain know how available at the customer size 24, 7 because that would be faster and quicker to get support. And that is what we are working at at ABB to make many of these agents available for our customers so that they can be served 24, 7 and at as much much as possible can get the help to improve the uptime on the factory floor. And the cement is one example. We have the same when it comes to the pulp and paper industry. You know the all the different industries have different skill sets and know how and if we can make a lot of that human know how available on the floor instead of having our service technicians place there 24, 7 but they can do a lot of these support available would make our customers and less what they asking for and to be better supported to increase uptime.

B (10:37)

Another point to remind to our audience is that you are actually serving multiple industry, not just energy. Because anywhere you can see automation opportunity you are there to support that industry whether it's paper or product or any other. Right.

A (10:51)

Any process industries that goes into oil and gas, into the manufacturing side or into mining or also on the discrete side when you talk about machine builders and everywhere automation is needed and then ABB is there to support those industries to become more productive and more competitive.

B (11:08)

One thing you touched on earlier, Martin, was electricity infrastructure and grid in particular. The grid seems to be falling behind. So what do we think is needed both in Europe and the U.S. i mean, to catch up with the grid. And if you compare it to China, which has a very sophisticated HP high voltage DC grid, we are not quite there in Europe and US are we?

A (11:30)

No, I would say both United States, but also Europe needs a massive investment. The grid here is aging. That's as you mentioned. China has the advantage that it did a lot in the last 20 years. In Europe, a lot happened in the last 40, 50 years and a lot of that equipment is aging. And that's the same in the United States. Aging equipment needs renewal, need to be replaced with more modern equipment, more automation as well in the grid so that we can have less outages. And if there is an outage that the break time is shorter. In the United States, it's a big investment into putting the overhead line, put them underground with cables, especially on the distribution grid. This comes to due to more extreme weather. For instance, more of the forest fires in California, the tropical storms or the hurricanes on the East Coast. This leads to some of the power outages that we face. Then it's not out for a few hours, but it could be out for many days or even a couple of weeks. And then it really hurts the local communities when you don't have electricity available because everybody is not fortunate to have a diesel generator in their backyard. And that makes life really hard in many places in Europe.

B (12:45)

What is happening on the grid? Are you putting in new grid and adding more automation? Are you powering the grid as they are calling it?

A (12:52)

Here is a combination. First of all, I would say many countries in Europe have different challenges. I mentioned examples of Spain and Portugal who has installed a lot of renewable energy which doesn't have the same grid stability. You know, the large, what we call synchronous machines or those in the electrical grid is what creates grid kind of stiffness or sturdiness. When you put in a lot of smaller power generation units like solar and wind turbines, then you don't have the same grid stability. Those comes from the large synchronous machines that we find in power plants. So what you have to do then is to put in what we call synchronous condensers, which are mechanical equipment that it can be placed out in the grid to create that mechanical strength. So you're able to keep the grid frequency and therefore also the grid stability. So this is one of the challenges of renewables. That's why you need to make also additional investments. That's what's happening in countries like Spain, Portugal I mentioned. But also like in UK which we have more and more renewable energy online. Of course the many countries like Germany have turned off their nuclear power, will have need more power. So there you will see an expansion of the grid when it comes to more gas fired power plants, more or less next to the old nuclear power plant because that is where you already have a grid connection. So we see massive investments in the grid and just also to have more electricity available because energy availability is what drives competitiveness of societies, especially of course in energy intense industries like steel, cement and chemical industries. This is so important for the future that electricity and energy is available for these industries or else you will not be able to continue.

B (14:41)

Again, I should give our audience an engineering lesson. The word they need to look up is inertia, isn't it that you were talking about how renewables create and the challenge, what happened in Spain there was a big discussion about the importance of inertia in the grid, isn't it? And you're providing technology and equipment, UABB to manage the grid, is that correct?

A (15:01)

We do that both as software but also as hardware and as I said, to bring that inertia that the grid mechanical equipment that gives grid stability so we can make sure that we don't have more blackouts, as I referred to earlier.

B (15:15)

Yeah, exactly. Another area we are seeing in the kind of power sector right now, Morton, is supply chains. Are you experiencing bottlenecks in supply chains?

A (15:24)

We have been able to ramp up capacity pretty well, but it has been a massive expansion of capacity also on our side, especially on the medium voltage, what we call or switchgear. That is where it's part of the distribution network or in the industry or incoming power to data centers that we talked about. So that is a very high demand, very different from what let's say historically have been used to. But that's a good challenge to have. When you see our industry is booming, it means it's more investment and more capacity is needed. And that's what we are addressing in all of our production units.

B (16:00)

So you're expanding your capacity on some of this equipment, right?

A (16:04)

Absolutely, we are into a massive expansion phase Especially in the United States and I would also say in India, two markets where we've seen very strong growth in the last years. And there is also where capital allocation kind of been the winner in the capital allocation with more capacity. Both because at ABB we are very much following our what we call a local for local strategy, which means that we serve the customers in the markets where they operate. And that has given us this sign of self sufficiency in the region. We can serve customers locally from their local units. It takes the whole tariff and also currency exchange rates a bit out of the picture.

B (16:46)

It's a very good strategy, particularly in hindsight when you look at what's happening in trade and tariffs.

A (16:51)

Right.

B (16:52)

That makes you very resilient to those shocks.

A (16:55)

Yeah. And this has been a long term strategy for abb. We have done that all the way back to I would say mid 2000. Myself I was working in China for four years and that was to bring up the self sufficiency in China for the Chinese market. It's not something new. It has a process that has been ongoing for the last 15, 20 years.

B (17:16)

One other area you work on, AB technology is active is energy efficiency and optimization. And I know that you started by talking about your goal as ABBA is to make industries leaner and cleaner. So tell us about how you think about efficiency optimization. What are you doing?

A (17:34)

We talked about how we can use automation and electrification to make industries leaner and cleaner. And that energy efficiency is in the center of that because kind of the other side of energy efficiency is energy waste. That is maybe the best expression to use here because nobody who want to run a competitive, profitable business likes waste. It's one of the major sins in the life of manufacturing and competitiveness. Wasting energy as we unfortunately do in so many applications today, that being H Vac units like chillers just sits up on the top of the roof or pump systems that is pumping that liquid or water around in society. So many of those electric motors, who runs those plants, pumps and compressors, they're a bit out of sight, which means also that they often are forgotten when we're looking at the right efficiency rate. So it's something that just comes on the energy bill every month when you receive it, but you don't always think about where does it come from. So there is where energy efficiency is a bit of the unsung hero. And I think today is more valid and more in the time than ever. And we are talking about the energy expansion and one way to reduce a bit the needed Energy expansion is to drive energy efficiency by upgrading to and to use electric motors of the latest kind of on the best technology available. We could save more than 10% of the whole world's electricity. And to think about the number of power plants we're talking about, then that's a massive number. And this is something which have a good return, often less than a year, so you can expense it. So. So it's just a strong business case. And that's one of the things that we are trying to help our customer to get more visibility of this opportunity. Because when people see it, then they make the investment, they make the upgrades and make the changes so that they save as much money as possible. Because in the end that's how you remain competitive in the marketplace.

B (19:35)

Yeah, 10% of global consumption, that's a very big number. Think about number of power plants which don't have to be built, many of them for the peaking supply, isn't it?

A (19:45)

Yes. So this would be a massive capex reduction opportunity. We still need more power, but if you can reduce it a bit, we will not have even enough talked about some of the shortage in the industry. We will not have enough capacity to do as much as we would like to do. So therefore energy efficiency is one more of those solutions that can help getting more equipment online, building more of those data centers we talked about or getting also industries to do the transfer to a more efficient way of operating.

B (20:18)

A couple of last questions, Martin. One thing. You are a global company in many developing countries. You mentioned India as an example. How do we make sure that those countries, those economies don't fall behind in this kind of big race to AI and don't get the power equipment and things they need just for the basic development needs.

A (20:35)

It's a very good question. It's also one of my concerns because I see that the need for investments, especially in a strong power grid, it's the backbone of modern society. And it's one of the reasons where some markets do fall behind today because it's expensive to always build up backup power generation when you don't have it. So I think here again the answer is back to technology and being able to here using all of the above measure when it comes to every energy source available. I believe here, for instance, solar and wind will have a good opportunities in many developing countries because the cost of initial investment is lower and the returns are good. And this is where we've seen for instance on farming in India and we also see now more and more many African countries using solar pumps as an application to drive agriculture growth. So here again back to using technology is the only kind of answer to do it and seeing also what could be low capex with high returns. So those are application we are also looking at and see how we can help here. Solar pump being one example but there are many mores that can drive industrial and agricultural productivity in many developing countries.

B (21:55)

So finally Martin, what is your call to action and what kind of conversations you're looking forward to at cerave?

A (22:02)

I think it's how we are able to use the technology that is available now. One of my frustration often today is that we are a bit too slow adopting many of the new technologies that being the power utility company in the power sector or on the industrial side I think that is what can delay many of the opportunities that we have in front of us. So using the technology that we have available that being in driving more energy efficiency but also driving more grid stability and that upgrade of the grid with more automation today a lot of the old way of hardwired relays as an example today much more can be done with software and it's faster and it reduces the engineering requirements. So daring to take the leap of faith into some of these new technology area that can accelerate now the energy expansion that is needed and we can also drive competitiveness on every society when we use the newest technology. That's my call to action. Use the technology we have already now we have come pretty far. That's the good news and now we need to take the full advantage of it.

B (23:13)

It's time for action and take a leap of faith as you say. Martin Rudd, CEO of abb thank you very much for joining us for this podcast and we look forward to seeing you at saraweek.

A (23:24)

Thanks Atul. I'm looking forward to catching up with everyone there.

B (23:29)

Thank you for joining us on the saraweek podcast to stay connected with the ideas driving change across energy and technology. Subscribe, share and rate this episode. It helps us get the word out. Let's continue having impactful conversations. I'm Atul Arya until the next time,

A (23:47)

the Sarah Week Podcast with Atul Arya is brought to you by Sarah Week, the world's premier energy conference. Be part of the conversations moving the world of Energy Forward 3-23-2720,26 in Houston. Discover more at saraweek.com.