GE power business is reinventing itself in the Asia-Pacific region, especially SE Asia, a geographical area which remains a key business for the company
General Electric Co (GE) is a US industrial giant. It ranks in the same class of other US-based titans like Apple Inc, Ford Motor Co, Conoco-Phillips Co, Hewlett-Packard Co (HP) and General Motors Co.
The US-based company’s domination at one point in many sectors and industries is as synonymous as IBM (International Business Machines Corp) to room-sized mainframes or laser printers to HP.
Despite going through a very “precarious period” in its corporate history, the Boston, Massachusetts- headquartered giant remains a force which will not fall.
It produces everything from aircraft engines that fly millions of people every week to powering power plants that light up industries and millions of home across the globe to medical imaging to financing and industrial products.
GE remains a force, especially in the power generation as it fights to reinvent a company which has for decades prided itself on their innovations and technological advancements.
GE Power Services president and CEO Scott Strazik said GE power business is reinventing itself in the Asia-Pacific region, especially South-East Asia, a geographical area which remains a key business for the company.
According to the World Energy Outlook 2017 by International Energy Agency, electricity demand from South-East Asia is projected to grow twice the pace of China, while developing countries across Asia will account for two-thirds of global energy growth, ahead of the Middle East, Africa and Latin America.
The Malaysian Reserve’s Rahimi Yunus spoke to Strazik on the power generation business in the region and how GE plans to boost its foot-print in a very lucrative, but competitive market.
Q: What is the power generation outlook for Malaysia?
Strazik: When I look at Malaysia, I don’t think the challenges or plans in Malaysia are different from the rest of the world. We have 84 gas turbines here, which are going to change drastically in the next decade 20 to 30 assets of those will be retired and replaced by more powerful and efficient units to support the grid. Total capacity in Malaysia is about 37 gigawatts (GW) which is expected to grow to 53GW over the next 10 years. Similar to what we have seen in other parts of the world, there is no better levelising factor than gas, as the capacity grows and the grid becomes more complex. In that growth, gas is projected to grow somewhere in between six to nine GW, of which a lot of it will ultimately involve our machines including the ones that we have already won in Track 4A and 4B, to be commissioned in the first half of the next decade. We add a lot of values into the country in terms of efficiency, scale and ramping capability for a grid that is going to need it.
Q: Do you see a competition between gas and coal for power generation in Malaysia?
Strazik: There is still plenty of coal here and I think that is the distinction. There is more coal that is being sustained here than other regions in the globe.
But, it is just another level of grid complexity that helps gas because coal is not going to be a form of technology that goes up and down quick. It is a big, big machine that is tough to move and once it gets going, it is going to create electricity. It is not very flexible.
Q: Is this the trend in other countries in this region?
Strazik: Yes. I think that is the distinguishing factor where the capacity growth is disproportionate renewable energies (REs). That is the reason why they need gas as a complementing force, because they can- not count on wind and solar everyday. Here there is definitely more coal compared to what we are seeing in the US and Europe. Nevertheless, it is still the dynamics between demand and output. Efficiency is important because gas prices are still high. We are excited about the solutions that we have; the new HA technology and the upgrades that we can embed into the existing installed base to make them more competitive.
Q: There are talks about nuclear power plants for Malaysia for electricity generation?
Strazik: Nuclear is very power dense and very economical. But it takes a very, very long time from start to finish to build one. It is not something that can help even in an intermediate term. There are a lot of concerns about safety. Otherwise, that plays a part in the decision. However, certainly there are more modern nuclear plants running in the world today. They provide a lot of optionalities, economical and for power density. But many parts of the world are going away from nuclear than towards it.
Q: What are the technology preferences in Malaysia?
Strazik: The grid in the peninsula can support a 1,000GW scheme which can support the needs for high power density gas turbine. We already have the 1,000MW ultra-supercritical Manjung 4 plant, the first in South-East Asia. Now, we have Track 4A and 4B. The HA technology places very well in terms of economies of scale, cost and efficiency for a lot of customers when they make a new bid. But there will always be a need for coal. There is also hydropower plant. It is a bit different in East Malaysia. Sabah is pre-dominantly gas. The grid is some- what limited with the largest bloc at 400MW.
Q: Can we bring the cost of power generation lower?
Strazik: When you talk about tariff, you go to coal. It is the lowest cost of electricity generation. But there is a need to balance the portfolio from a security standpoint. Fuel diversification is critical. If the customers want coal, we have steam business that provides the technology with 1,000MW ultra supercritical. If they want gas — we have the technology with a block size of 750MW-800MW range at more than 62% efficiency. They would manage the portfolio. It is like buying a house, dollar per sq ft. Ours is dollar per kilowatt hour. There is also the currency factor. When the time of the project was signed up at 33 sen, the currency was at US$1 to RM3.80. The ringgit has fluctuated a bit compared to the other currencies such as Thailand baht and Indonesian rupiah.
Q: How will RE come into play?
Strazik: It varies to what part of the world you are in. It just comes back to the expression of power density. If you are in the US and in the middle of the country with reasonable wind corridor and access to solar, you would want to take advantage of that. In many parts of Asia, the power density is going to outweigh the operating cost of having wind turbines or solar panels. They take up too much acre- age to ever produce a meaningful amount of power. So, that is why for me, if there is a place for me to travel and be optimistic about the future of gas, it is often Asia. It is because of that power density needs that make it very hard for RE to get over that hurdle, especially in the near term. Apart from the land availability, it is also about the sophistication and capability of the grid. It is easier to have one interconnected grid that can serve the entire country than having more power islands or load centres.
Q: How is GE power performing in the region for the HA technology?
Strazik: We have 22 HA orders now. All to be commissioned between now and the early 2020s. At least five orders are in Malaysia that produce more GW at higher efficiency to replace 24 retiring units in the country. Net that, is exactly where you want it to be and I find it the most compelling to me. You add three plus GW with new HA technology at 64% efficiency to replace 24 older gas turbines, where some have below 40% efficiency. That is a country and a grid system that is progressive, in addition to the fuel diversification. Indonesia for the last three years has embarked on 35GW as part of President Joko Widodo’s plan. At least 19GW has been decided and we got four GW of that 19GW. Vietnam is also doing its own, but rather small. They have coal and are wait- ing for gas. Thailand is predominantly 75% to 80% on gas and we have secured two HAs there. Beyond Asean, two countries that are being driven by government policies, Korea and Taiwan. The new governments are retiring nuclear. No more coal, so it will be gas. So for us, you can’t find a better business opportunity for gas.
Q: What are the market GE is aiming?
Strazik: We are looking at GW of retirement over the next couple of years. Our forecast is that from today to 2026, based on installed base capacity, gas will increase from 20GW to 26GW, while coal will increase from 12GW to 15GW. At the same time about 3GW of retirement will occur in that period which needs to be replaced as well. But, certainly there is more new gas being projected here than the retirement.
Q: What is GE’s strategy for the power business?
Strazik: We are in the world that needs power dense, flexible solutions and ultimately to improve the overall economics. That is why we have shifted to the H-technology for a start. As there are replacements, we feel that we have the right technology to support the grid. Power dense, efficient and fast ramping capability is important to offset the intermittency of RE. At the same time, we are recreating ourselves with the existing installed base and finding ways to keep those machines running by providing upgrades into the fleet. Those machines may be older, but they still can run well. There is a lot more opportunities for us around the world to serve new technology improvement to support the existing fleet. At the same time, we make the investment in the HA technology for the new bills. We do these two things in parallel. Everyday, it is how we can get ahead of the curve on new-built technology, while we support our existing fleet and keep them running.
Q: What are the things GE doing globally?
Strazik: Besides the HA technology and upgrades, it is certainly on digitalisation. It is about how we use software in an effective way to make our plant ultimately complement and support the grid in an even more flexible and creative way. It is still in the early stages of development but a big priority. When you look at grid with even more diverse fuel mix and profile capability, digital plays a key role.
We made one big investment with Alstom SA. It brings a lot of capability and footprints within Alstom. GE is now in a chapter to absorb and streamline those footprints in an effective way for both Alstom and GE customers in the best way possible. Next, we re-evaluate the future to grow and invest in new places. But right now, we are optimistic with what we have. It is a work in progress.
There is also a constant need to collaborate with partners in talent training as it becomes more critical as new technology comes in.
Q: What are the challenges faced by GE?
Strazik: We aspire to be a world-class service provider. We think there is a lot of opportunities for us to help our customers run more economically. We are in the process of holding accountable of every assets in the fleet globally, understanding their needs and finding ways for them to run more. No plant is left behind. Now, the main challenge is to have the right people to execute the job. We focus a lot on the planning phases and execution. Customers expect GE to be a world-class service provider. One of the big benefits of acquiring Alstom to us is, we get a lot of talents and technology expertise. Alstom comes not only with people, but true capability. Combining historical Alstom team and GE, we exponentially have grown our presence especially in technical capability.