In this episode, Morten Wierod, President of ABB Electrification, and Gaute Engbakk, Partner at Ballista Technology Group, discuss a range of impactful topics, including:
- Challenges facing the world’s energy systems
- How we need to handle the accelerating shift to electrification
- The crisis of complexity in technologies used in industry today and the silo-ization of solutions
- How a more holistic approach to analytics can help solve this crisis
- How one change, alone, could save 10% of the world’s energy consumption
- What sustainability really means to ABB and how much market pull there is for such initiatives
- How and why ABB aggressively embraces the startup community
- Why a big vision is necessary, even in engineering-oriented cultures
- Market predictions for 2023, including an outlook for the electrification market
Links:
Transcript
Blaine Mathieu:
Joining me today is Morten Wierod, president of ABB Electrification, and Gaute Engbakk, partner at Ballista Technology Group. It is truly a pleasure to have both of you on Business at the Edge, and this is actually the first time we’ve ever had a three-way conversation on the series. Welcome, gentlemen.
Gaute Engbakk:
Thank you.
Blaine Mathieu:
So great to have you here. Morten, why don’t we start with you? Tell our listeners about your role at ABB and maybe a little bit about how you got there.
Morten Wierod:
Well, thanks, Blaine and it’s great to be here and join you and Gaute today.
To start, what I do today is leading the business area of Electrification, which is around half of ABB. And that means really getting electricity from substations and big plants and down to every part of the world when it comes to industry, it comes to households. It’s really electrifying the world, what we call it, in a safe, smart, sustainable way.
That’s what we do at ABB and in Electrification. And I’ve been with the company for 25 years, and I’ve had many roles both in Norway, living four years in China, and the last 11 years here in Zurich in Switzerland, where I’m sitting today on the Executive Committee of the company. So it’s been a very interesting ride with ABB, and I always got new opportunities. I’m still very passionate about what we do in ABB, and how we can make a difference using technology to help industries and utilities and society going electric. That’s what we do today.
Blaine Mathieu:
Excellent, thank you Morten. We’re going to dive more into that in just a second. Before we do that, Gaute, why don’t you do the same?
Gaute Engbakk:
Sure. I call myself a commercial technologist if there’s such a thing, meaning that I’m still very passionate about technology, but perhaps more about what it can do for society and business. And we are looking forward to this conversation because these days we have a situation where power and water is under pressure, and smart infrastructure, and solving that problem for the future is one of the key tasks that we have at hand. So really looking forward to discussing this.
Blaine Mathieu:
Excellent.
Well, since you brought it up, why don’t we dive right into that, Gaute. As you said, these are challenging times. Our infrastructure is under a lot of stress. Many listeners will be experiencing higher energy prices right now, even maybe energy shortages. And as Morten said, there’s an accelerating shift to electrification going on right now driven by many factors, but electric vehicle sales are booming. Then we have the war in Ukraine, and I think earlier today OPEC announced a two-million barrel reduction in petroleum production.
So a lot of impacts on infrastructure and certainly a lot related to electrification. Maybe I’ll start with you, Morten. How can industry players help address some of these challenges that seem to be coming from every direction right now?
Morten Wierod:
Yeah, and as you said, Blaine, it’s how now energy has become even part of our national security and how we operate as societies. And here in Europe we feel it very strongly these days, preparing for a rough and hard winter.
And it’s something we at ABB – I have an electrical engineering background, so this has been what I’ve been working with for the last 25 years. We talked about energy efficiency, the importance about grid reliability and how to use technology to be able to have, as I say, an up-and-running industry and infrastructure 24/7.
That has been what we do and my objective for the last 25 years. But now it’s become way more important. I think that’s also how we are able to now work with industries to make them more efficient. It has, again, been in the forefront for many years, but now it’s about how you use digital and digital services to take the new step because a lot of the cost savings from the past – that’s been often labor arbitrage – are meant to move value-added activities to low-cost. Today that is changing again. It’s more about how we use automation, robotics, but also digital technologies to be able to drive this change.
So it’s a lot happening both in industries, but also in our daily life, as you say, with the electric infrastructure of EV power. And so it’s an interesting time for us as an industry, and I think we have to rise to the challenge now. Because what we have talked about – what we can do for many years – now we have to do it, and the time pressure is really much higher than it was before.
Blaine Mathieu:
What do you think about this, Gaute, about this area?
Gaute Engbakk:
Super-important area, as Morten says. I think that one of the challenges I see is that industry 4.0, it promised us all these things: that we would be able to do everything from predictive analytics to automation and really use data to be able to operate more efficiently, safer, and with higher productivity.
Unfortunately, what I see is that while we have been tech-savvy in many companies and whenever I talk to a, let’s say, industrial company in some way, they’ve always been very tech-savvy. They’ve installed all kinds of IOT solutions to mitigate or measure something. The problem, though is – and let’s take an oil and gas platform, for instance – on average, it has 40,000 sensors. So the problem is all this data seems to be in silos. You have lots of these IOT solutions, but they’re all siloed, and it’s really hard to see correlations between events that happen.
And I think that’s one of the things we’re really trying to mitigate with Pratexo is to be able to actually see correlations between events happening on a larger scale and at scale, because there’s a huge amount of data. So actually, part of the solution, I think, is to be able to capture all this data across and then be able to process it where it occurs because it’s just so much data.
Blaine Mathieu:
The topic of silos is really interesting. Is this a challenge for ABB, as well? You have so many different kinds of machines, systems, so many sub-business units as part of the Electrification unit. I imagine this notion about breaking down silos and providing more holistic solutions for your customers is one of the things you talk about a lot.
Morten Wierod:
Absolutely. And I think it’s not as specific for ABB as a company, but it’s for the entire industry.
Blaine Mathieu:
Totally.
Morten Wierod:
It’s about having access to the data, but then you also need to understand what those data are really telling you, because data as such, if you don’t understand what it means, you cannot act on it. And the only value in the end is what actions we are taking and how we are using different data points for better decision-making.
And I think there is where I always believe that you need to have everything connected, but then you also need to have an open architecture and open platform so you are able to work together and see those different data. And then you need industry experts that understand what that data mean and even connect those industry experts together.
And this is the challenge, I think, of the complexity that we have here, and how, therefore, it’s sometimes easier to go back into your own cave and say, “No, okay, it’s so complex, so I just do my little thing.” But then we are also losing a huge opportunity for connecting all this data together in a better way. So I think that is both the dilemma that most companies do today. You say, “Okay, due to the complexity, I would rather focus on my own little part, what I can do.” But then we’re also losing out.
Blaine Mathieu:
Agreed. I’ve often said that the industry has been in a complexity crisis for some time now. All these sensors, devices, machines putting off data, and we’ve become overwhelmed with it at some point. And so bringing new innovative solutions to bear, I think, is the only way out of this conundrum.
And the challenge, like we were talking about a second ago, is a lot of these timelines have been accelerated. I was at a conference about wind energy in Norway a few months ago, and they were talking about now having to do in three years what was originally a 10-year plan for implementing these systems across the electrical grid. So we have to overcome these challenges and these complexities. As you said, we have no choice now.
Morten Wierod:
And I think it’s also important that we look at these early indicators and inputs – and that’s what sensors and early data analytics can help us with. Today, often, we do a fix and repair: we see that something is on the output side, is the end of the process, but we need much more to move to the early indicators. And there we have data again, but then you need to understand the process and how it works. So you can do a pre-planned service instead of doing a repair service after you have it shut down. And here we’re talking about massive cost avoidance if you can get it right.
Blaine Mathieu:
Absolutely. Gaute?
Gaute Engbakk:
Yeah, I was just thinking about the whole electrification, and super interested in hearing Morten’s view on how can we actually achieve this. Because we are in a situation where I talk to power companies and they will tell me, “Actually, our grid is under-invested over decades. And in 2030 we will have only electric cars, and really, we don’t have a grid that supports this because the amount of power needed is more than what we can provide, at least in peak hours.”
On the other hand, we’re all betting, all countries are betting on renewables such as solar and wind, but those are fickle sources of energy, which means that the output will vary over the day. So what do you think, Morten? Is this something ABB is also focused on – something you’re working on?
Morten Wierod:
That’s the core of what we do, so thanks for a great introduction. And therefore it’s not just about capacity, which is one, yes, we do need to invest more in renewable sources to replace also the carbon intensive energy generation as we have today, especially in the field of brown coal. That’s the renewable shift that still has to happen, so there are massive investments that have to go in there.
But in addition, there are two more things. One is about load shedding energy management. To use an example from daily life would be more like traffic control. Over roads around the world, more or less, it’s enough road capacity for all the traffic that we need today, but it’s more the peak hours, because people don’t want to travel, go to work at three in the morning when there are no cars. They want to go around after they have their breakfast at seven or eight. And this is the same in our power grid, that often the capacity is there, but it’s the peaks that we need to manage.
And how we can do that is twofold. One is, you heard about battery and energy storage, which is more that you can balance the use of power. And the other one is about energy management, and that could be building automation, which means that you use, again, software to control when you use the power. In practical terms, you heat the hot water for your morning shower during the night and not during the day. These are very practical examples. You charge your car, say, not when you come home from work, but you do it after midnight. So this is twofold.
And then the last piece, I also want to say, is about energy efficiency. And we have, still, a huge opportunity for energy efficiency, just in the field of electric motors. We are, today, using around the world, often still very old technology with very low efficiency. If we would use more new and higher-efficiency motors in industries, that alone could save 10% of the world’s energy consumption.
Blaine Mathieu:
Wow!
Morten Wierod:
So this is one very practical way, where upgrading the technology and using what we have at hand today could give us a savings of 10% of the electricity alone. It’s also the awareness that needs to happen, both awareness for ourselves and now when energy prices are on the level that it is in most countries, the energy efficiency savings are so big. So the return on investment, in industrial applications, is often even below a year. So here it’s the awareness and the opportunities, but also for governments and regulators that need to be actively involved to address this.
Gaute Engbakk:
I guess most of us will have a battery in our home, or several, at least in our cars we will have batteries where we can actually store energy and even provide energy back to the grid when needed. So it’s an interesting future we’re looking ahead at here.
And what I’ve learned, though, is when we work with – the moment you introduce batteries and you want to do this power balancing, and of course, everyone is interested in the flexibility market around this – the requirements around real-time decisions become greater because we see that if you want to charge electric cars, for instance, you have to be able to very quickly decide how much power to give that car or you blow your fuses.
So an interesting aspect around this project we’ve been working on where we see that when we have large electric trucks, for instance, three of those, I was told by a power company, will draw as much power as the city of Eskilstuna. In other words, logistics also becomes important in the whole aspect of electric vehicle charging.
Yeah. It will put a big stress on our power grid, and you cannot – with the grid we have today and without using the new technology available, this will not work.
Morten Wierod:
But I think that awareness is getting there, but it takes some time because we believe that we have power enough in our socket outlets, in our houses, and even in industry. And I know city councils, when they make decisions, “Let’s replace all our buses with electric buses,” which is the right thing to do, but it follows a much bigger investment and commitment on the grid side than just buying electric deposits.
So I think quite a few cities and governments have also had a bit of an “ah-ha” experience when making some of the well-intended sustainability decisions. But you have, also, to follow up with a complete infrastructure so it really works in practice. So we still have a lot of work to do as ABB and in the industry, also, to educate decision makers. What does this really require, and how can we use and how we have to use technology to be able to make it happen?
Gaute Engbakk:
Blaine, you’re living in California, so you probably have this sort of paradox where on the one hand, people have electric cars; on the other hand, you won’t be able to charge them.
Blaine Mathieu:
Yes. Well, that’s why I’ve got a 30-kilowatt solar array on my roof, I’ve got a 22-kilowatt standby generator, and I’m putting in batteries shortly. So I’ve got all my bases covered here in California, no matter what happens.
And I can say the complexity of that system right now, because many of these are still relatively in their infancy, is interesting to manage. They are certainly not a highly -tuned integrated system. These are, back to our earlier discussion, siloed systems that are still figuring out how to work together and with the grid. But we’re getting there. We’re getting there.
So Morten, you raised sustainability a few times. Maybe to jump directly into that topic, what is ABB’s real take on the topic of sustainability? I know ABB, the company, does a lot of work in this area. There’s a lot of content on the website about sustainability and ABB. What’s the general approach or thought?
Morten Wierod:
Yeah. First of all, sustainability comes to the core of what we do and even who we are. And we have started, also the journey, first of all with making our own operations carbon neutral. That was the first, because I always believe you need to clean your own house before you tell others and the neighbors what to do. So that is the first step that we have. We all have a clear plan – by 2030 is the official commitment, and I know we will be there already by 2025, and we will be carbon neutral in all of our operations.
But of course, the biggest impact we have, which is thousands of times higher, because ABB, we are not the biggest producer, as we do mostly assembly and office work. The biggest impact we have is working with our suppliers and mostly with our customers to help them reduce their emissions. So we used our own framework that we also openly share with suppliers and with customers, of what we’ve done and also how we can help them, using technology to reduce emissions and have a smaller carbon footprint.
This is a journey for us where we have given a strong commitment to the outside world, and now it’s also a strong commitment inside the company, that everybody’s making their own contribution when it comes to energy efficiency or how we consume energy in our daily lives. I see also a lot of engagement with energy efficiency campaigns within our own organization, and people are sharing experiences, what they’re doing to reduce their own energy bills and smaller investments, because, in the end, the only way we can change is by many actions, by the many: both industries, but also private individuals. We all have to change behaviors in many fields.
And a lot of those, to change those behaviors, you need to have knowledge and you need to have transparency. Because the good intents and good intentions are in place, so it’s more about people are conscious, “Okay, so what should I do in practice?” And there is where we, as a company and ABB, is helping both customers and suppliers to make better decisions and to show them how we can use technology to reduce carbon emissions on an everyday basis.
Blaine Mathieu:
And are you feeling a lot of pull from the market for helping your customers with sustainability initiatives that they have underway?
Morten Wierod:
Yeah, absolutely. And we see a big trend the last years. Of course that is both driven by external regulators, but also even by investors today. We’re having much tougher demands to companies. But also, it’s an internal need and an essential purpose. I think every employee wants to work in a company where we all make a difference, so that you feel at home in your company. So it comes both from an outside pressure, but also from an inside request or demand to work in a company that we also want to help here.
We want to make a difference. So I think every company today, in their purpose statement, it is fulfilling both what is external but also internally required. And then I think, also, everybody starts to get way more demanding when it comes to, “Okay, so what are we really doing? What are the tangible actions we are taking to reduce?”
So putting a framework in place and also having a third-party certify becomes more and more important to avoid the topic of greenwashing, because this cannot be a marketing stunt that somehow we are just giving big predictions about 2050. People want to see, “Okay, what do we do today? What are we going to do by 2025?” And I also have been pushing that a lot myself. I don’t think we have the time to have high ambitions for 2050, because that is “Let’s deal with it later.” So what do we do right now?
And that’s where I push, again, technology. That’s where I feel we can make a big difference as a company, and also me, personally. It’s where we have the knowledge and have to help. And that’s where I think we all can make that kind of difference where you have both skin in the game but oh, at the same time, also you have the tools to help. That’s where we all have to step up.
Blaine Mathieu:
Yeah. Makes perfect sense.
Gaute Engbakk:
Yeah, I was just going to comment on that. I think sustainability has changed from, let’s say, the greenwashing that it maybe was five, 10 years ago, and now it’s really about monetary improvement. And I think that’s when it works best: when you can combine the shift from, let’s say, polluting systems to greener or more sustainable technologies. I think when you combine this with financial incentives, that’s when we will see real action. I think that goes both for, let’s say, the households and the industry.
Norway is… 80% of new cars sold now are electric, and most cars, almost, at this point, are electric. And that didn’t just happen because the Norwegian population is so environmentally friendly; it’s because it was incentivized by the government.
And I think we’ll see the same in industries, be it shipping or oil and gas or whatever industry. Ultimately what we go into, if we can link, let’s say, financial incentives, low-interest rates on loans, lower insurance premiums, but also make the case that, by being more efficient in our production and operations, we will actually also reduce costs and CO2 emissions. So I think you actually need both to really make the change.
Morten Wierod:
I often say you need to connect the head and the heart and the wallet, all three to make a fast adaptation, to make things happen.
Blaine Mathieu:
A hundred percent agreed.
And from the startup perspective, we’re definitely feeling that same pull from sustainability-related initiatives. Our largest investor, actually, today, has sustainability as their core investment thesis, which is really why they invested inn Pratexo in the first place. Because they see the ability to use edge computing and micro clouds, and the ability to do real time analytics and applications to improve machine efficiency and address other interesting use cases, are very much focused on sustainability.
In fact, in a couple of weeks, I’ve got a meeting with the sustainability team of a large global system integrator. I won’t say the name, we would all know them. They’ve got a team of engineers who are focused 100% on sustainability-related technology implementations at their clients. So I’m seeing a lot of pull from all directions here, for sure.
Well, and speaking of startups, since I brought it up, many of our listeners will know that Pratexo was recently chosen by ABB as a winner of its Electrification Startup Challenge. And now we are working with ABB on a number of projects.
I appreciate that, Morten. The challenge was a really rewarding experience for Pratexo, and it really amazed me, actually, how engaging and nimble and open ABB and ABB Electrification, in particular, was to working, not only with Pratexo, but this array of startups that you engaged as part of the Challenge. And I know you engage on an ongoing basis.
What’s your thought, Morten, on why you engage with startups like this? What do you want to get out of it? And why is ABB seemingly a lot better at it than most other large industrials that I’ve had the pleasure to work with over the last few years?
Morten Wierod:
Thanks for the good words, the good introduction. I appreciate, also, that you’ve also felt the same energy as we had.
And we do it for two reasons, these Startup Challenges. It’s because the startup spirit, it’s something we at ABB and the entrepreneurship we want to have ourselves, but we also acknowledge we are a big company. Yes, we do spend a couple of billions of dollars in R&D, but we know we cannot do everything by ourselves. And we don’t want to be arrogant and think, even with the size that we have, we know how to do everything.
Therefore, I believe we need to connect with startups, with companies that are specialists in other areas than ourselves, because as I say, I believe in open architectures, the sharing of data. And the only way we can challenge ourselves that we are good enough is to expose ourselves to the outside world.
And we see, also, the speed, the agility of smaller companies like yourself with Pratexo. It’s how we also are able to challenge ourselves, “How can we become better?” So it is to get access to great ideas, to get access to great people who could help us to solve big problems. And it’s also to challenge our own organization to be outside-minded: that we don’t get so busy within a large corporation like ABB with a hundred thousand people, but that you are able to engage across industries.
So I think that it’s both an in internal wish of how we can become better, but not the least, also to see what is going on and find some of these great ideas from Pratexo, what you’re doing, and how can we use that. Because we have the scale and the base within ABB, and if it can deploy some of these solutions across industries, across the world, it could make a huge difference. That’s our key motivation. So thank you again, Blaine, for taking part in the challenge, and congratulations again for winning it.
Blaine Mathieu:
Well, thank you, Morten, we appreciate that. I know Gaute, you’ve worked both on the startup side many times and representing some very large global companies. What is your thought on this topic?
Gaute Engbakk:
I think actually, there might be even three reasons why ABB is so good at working with startups like Pratexo.
I think it starts with the willingness or the desire to learn. ABB is an engineering organization at heart, and it’s an organization that prides itself on learning and I think that’s part of the culture. So bringing something new into a company like ABB, it’s not something dangerous, seen as “something threatening to my job” or something like that. It’s something they embrace and they try to learn. They want to learn something new. And I often say that the biggest obstacle, sometimes, to having a customer introduce Pratexo into the organization is, are the people willing to learn new technologies and learn new ways to see how to do something. So that’s number one.
The second, I think, is this: having a champion from the leadership, like Morten here, who actually puts this on the agenda and says, “This is where…” Points with the whole hand, as I like to say, and say that this is something we will actually do. I think that’s super, super important so that people feel that they have the anchoring in the leadership that they need.
And the third thing, I think, is to have a big vision. I think that’s my advice to companies in general. Have a big vision of what you want to achieve with using your data and making use of algorithms to improve operations. But don’t try to swallow the whole elephant in one piece. Try to divide it up so you can do one small thing after the other. That’s actually, in general, my advice around digital transformation: try to carve it out in smaller pieces and succeed with them, and then you build confidence in the organization and you can make it a broader initiative.
Blaine Mathieu:
Right on. Well, folks, I think to wrap it up – this has been a great discussion. I really appreciate the time. Any technology or business predictions for 2023 for the year ahead? We’re actually only three months away. Hard to believe. Thoughts on what is coming in 2023? Maybe Gaute, I’ll let you go first.
Gaute Engbakk:
So I think that we will continue to see a lot of, let’s say, engagement and investments in the whole electrification space. And we have to, in order to make this happen. I do hope that we will see… Because we have had this transition into, let’s say, everything into the cloud, the past decade or more. Obviously Pratexo, also, is a cloud solution, but perhaps much closer to where the data occurs. I think that is going to be edge computing or local private cloud computing. I see that as one of the big trends that businesses will be able to take advantage of and use – make more use of their existing data in sensors and equipment. So maybe I’m a bit biased, Blaine, but that is certainly one of the big trends that I see. We will make use of these data close to their source.
Blaine Mathieu:
I think so. Morten, please. Thoughts on, predictions for 2023, for the year ahead?
Morten Wierod:
Yeah, and to follow up, in ’23 I believe that we will see a clear slowdown in the market that’s due to the inflation targets. To get the inflation down, we will see a slowdown. It is clear. But I think when we talk about the field of electrification, we will not see a slowdown. I always use the statement, “The world is going electric,” and that will be valid for ’23, ’24, and onwards. So I believe that change will accelerate, will continue.
And also, the trend of sustainability, that we want to become more sustainable. I think those challenges and the demand both internally from team members, but also from investors, that those trends will not stop.
So those trends, I believe, will clearly continue. I think what is important, and I hope maybe that is as much as a hope: when we are going electric, we also need to see a lot of investments by governments, as well and that they are really being focused now on the topic we said earlier, about installing more capacity of renewables, when we see more incentives around energy efficiency and also about how we use load management.
These three topics need to be addressed, and I believe we as an industry will come up with the technology and the solutions. And we also need to see that governments and regulators will need to follow up, also addressing investments in the sustainability area.
But I always believe in the market, and the best way you can do it is by using market dynamics to see that happen. So even though there are uncertainties for a cold winter, especially here in Europe, I’m still optimistic when it comes to that industries and societies will come together and be able to make it. I’m more into the soft landing than the hard landing. And I do believe that technology is the key enabler to making this happen. If we take this opportunity now, we can really also drive the green shift that is desperately needed.
Blaine Mathieu:
Well, Morten, I will let that optimistic note be the final word for today. Gentlemen, both of you, thank you so much for the time and I really hope this is not our last conversation. I’m sure it won’t be. Until next time. Bye-bye gentlemen.
Gaute Engbakk:
Thank you.
Morten Wierod:
Thanks, Blaine.
