In a presentation to international press and investors, ABB has set out its goal to focus on business growth priorities in which storage, micro and nano grids will play a central role. CEO Ulrich Spiesshofer enunciated this strategy in the context of the company becoming, "the leading partner in the big shift of the power sector."
A key part of this strategy is the firm’s partnership with China’s BYD, announced on Monday, that brings together the firms’ power electronics capabilities.
"This is a wedding that we have already tested when we worked together in the e-mobility space," Spiesshofer said. The CEO was referring to ABB and BYD’s fast charging infrastructure that the companies are currently rolling out in China.
With BYDs 180,000 staff and ABBs 145,000, the German CEO said that the combined team of 300,000 is set to see the companies partnership forming the "leading entity in the energy storage world."
Setting out the changing utility and electricity sector in which ABB finds itself, Spiesshofer said that the utility business model has shifted and that the sector can no longer be described as being "dull and boring," adding that "these times are over." Increased renewable penetration means that grid complexity has increased, requiring intelligent control of electricity supply and distribution.
On the consumption side, "micro and nano grids will become the reality," Spiesshofer added, with the BYD partnership meaning the firm is at the forefront of this fundamental shift. Pointing out that "renewables are constantly ramping up," Spiesshofer said ABB was targeting India and Africa in particular.
ABB identified the utility sector in general as representing a market opportunity of $600 billion at present that will grow to $750 billion through 2020. The shift from simply transporting electrons to intelligent grid control and longer and higher capacity interconnectivity is a key part of this market.
Along with the BYD partnership in storage, a key part of ABBs business in PV is in solar inverters. While ABB previously had a central inverter business, for PV power plants, it added a string inverter portfolio when it acquired U.S. firm PowerOne last year. As Spiesshofer said in his Capital Markets presentation, this means the company is now the second largest inverter supplier globally.
Power systems "step change"
Reflecting on the company’s shifting strategy, Spiesshofer spoke of ABBs exit from the solar EPC business, which is expected to be completed by the end of the year. ABB has ceased taking on new PV EPC projects and hopes to have completed legacy projects by the end of 2014.
Another component of the power system business is ABBs role in providing grid connection for offshore wind. This formerly troubled segment of ABBs business, including the solar EPC component, is set to be profitable in the fourth quarter of 2014 with a full-year 2014 goal of also returning the power systems business to black, according to Chief Financial Officer Eric Elzvik.
The step change in the power systems business involved a different approach to reducing planning and technical risk. Importantly, ABB intends to continue its power systems business in partnerships, where ABB brings its power conversion and distribution expertise while construction partner plan, develop and execute in terms of construction.
Looking towards business growth opportunities, CFO Elzvik said the utility segment is forecast to deliver 2% to 4% year-on-year growth through to 2020. Transport infrastructure, including e-mobility, was also identified as an "organic growth" priority, with a target of 4 to 6% YOY through the end of the decade.