Global industrial electricity consumption has grown at an average annual rate of 4% since 20201 and is expected to continue rising over coming decades.2 Meeting that growing demand is not just about expanding energy supply, says Morten Wierod, president and CEO of Zurich-based ABB, whose business focuses on electrification and automation. \u201cWe also have to make sure that the electrical grids and energy systems are more reliable, efficient, and secure,\u201d says Wierod, who ran two of ABB\u2019s business areas, Motion and Electrification, prior to taking the chief executive reins in August 2024.<\/p>\n
In a conversation with Konstantin von Radowitz, a senior partner in Strategy & Transactions with Deloitte Switzerland, Wierod discusses pivotal trends in the energy sector and how ABB and its customers in power, industry, buildings, and transport are adapting to those changes. He also addresses questions about the return on investment for energy efficiency technology and how he balances the opportunities and risks of building a fast-growing data center business amid concerns about the pace of AI investment.<\/p>\n
Von Radowitz: What do you consider to be the most important emerging trends in the energy market?<\/p>\n
Wierod: The world is going electric. A few years ago, energy transition dominated the conversation. But here\u2019s the reality: most, if not all, renewable energy installed since 2019 has met additional consumption; it has supplemented, not replaced, fossil fuels.3 That transition remains ahead. Today\u2019s challenge is energy expansion\u2014the world needs dramatically more electricity.<\/p>\n
Three factors drive this surge. First is industrial electrification, which promotes energy resilience, cuts maintenance costs, operational expenses, and emissions. \u00a0Second, rising economic prosperity in high-growth markets such as India and Indonesia increases electricity demand.<\/p>\n
Third, of course, is the ascendance of AI and the accompanying boom in data centers, which require enormous amounts of electricity.<\/p>\n
As electrical grids face growing pressure from demand growth and clean-energy integration, we need to make both our grids and energy systems more reliable, affordable, and secure. The rising appetite for electricity strains aging grids, which need infrastructure investment to maintain reliability and affordability while expanding capacity. Energy security is also now central to the conversation, and efficiency, electrification, and grid decarbonization are key drivers.<\/p>\n
What challenges and opportunities do these trends pose to your customers, and how is ABB positioned to help companies address them?<\/p>\n
The main challenges are rising energy costs and accessing sufficient and reliable electricity. The opportunity side of it for companies is that electrification and automation can improve efficiency, productivity and resilience. The payback case for energy efficiency investments has improved significantly. For many companies, that means they don\u2019t have to choose between short-term costs and long-term productivity, or between running leaner or cleaner.<\/p>\n
ABB, with our 110,000 employees across the globe, plays a role across the supply and demand sides of power generation, distribution, and consumption. Over the last five or six years, we\u2019ve been sharpening our focus on electrification and automation to support energy efficiency, resilience, and security. For example, we are working on integrating renewables into grids to improve both overall system efficiency and the efficiency of how thermal power plants are operated.<\/p>\n
We\u2019re also investing in new technologies that enhance energy supply resilience, such as\u00a0enabling the\u00a0connection of geothermal power plants to the\u00a0electrical grid with advanced controls and automation systems. Data center developers are now looking to locate new AI factories next to geothermal facilities, so power generation is co-located with major consumption points. As electricity becomes scarcer, these innovative approaches become more economically viable.<\/p>\n
Let\u2019s talk about the business case for investing in energy efficiency, which has high upfront costs. What are the challenges company leaders face in dealing with the extended timeline for ROI?<\/p>\n
I think the business case isn\u2019t the real challenge. It\u2019s about awareness and misaligned incentives. Equipment sits on rooftops. As long as it works, nobody pays attention until the power bill arrives. And then, the people or entities making energy-related investment decisions often aren\u2019t paying the energy bill. Take apartment buildings\u2014landlords may buy cheap, inefficient appliances because tenants pay for the electricity. Tenants won\u2019t upgrade because they\u2019re renting. This dynamic also plays out in industrial and commercial buildings.<\/p>\n
We need to reach the right decision-makers and demonstrate that investing in energy efficiency often has only a six-to-12-month payback. To do that, we conduct energy audits\u2014sending teams to identify opportunities where motors, compressors, and pumps run on outdated technology. Payback of less than a year makes the investment an operating expense rather than a capital expense.<\/p>\n
Your data centers business is your fastest-growing market. How do you balance investing in this market opportunity with concerns about the risk of an AI bubble?<\/p>\n
In general, I\u2019m confident this opportunity will last many years because the need for data, cloud computing, and AI is just beginning. The buildout will take years.<\/p>\n
The challenge is achieving the right balance between opportunity and risk. We want to capture opportunities in this fast-growing market, while maintaining our commitment to customers that we have been serving for decades, including pulp and paper, steel, and mining.<\/p>\n
An important consideration is that our R&D investments for data centers benefit other business segments. The equipment used in data centers isn\u2019t exclusive to that sector. Medium- and low-voltage switchgear that provides reliable power distribution in data centers is also used by utilities and traditional industrial customers. We don\u2019t have separate data center products. When we gain scale from data center growth, other industries benefit as well.<\/p>\n
What is your approach to navigating today\u2019s complex business environment?<\/p>\n
The fundamental challenge for any global business is to remain competitive across all of its markets as the world becomes more regionalized: One size no longer fits all. At ABB, we have a strong tradition of local-for-local manufacturing, enabling us to stay close to customers. We take a local approach to our offering, localizing R&D and tailoring our product portfolio.<\/p>\n
Another priority for us is distinguishing signals from noise when making strategic, forward-looking decisions. After years of pandemic disruptions, regional conflicts, semiconductor shortages, tariffs, and polarization, I think many companies have improved at crisis management and learned to filter noise.<\/p>\n
For me, having a global customer base helps enormously. I travel extensively, meeting leaders across industries and regions. Speaking with executives worldwide prevents tunnel vision and helps me separate valuable information from less important data points. An important takeaway from those conversations is that despite geopolitical uncertainty, customers still make long-term decisions. I also find that business leaders from different parts of the world often struggle with the same challenges\u2014there\u2019s comfort in that.<\/p>\n
As a CEO, I always try to listen more than I speak. It helps me be a better leader, whether it concerns making sure we\u2019re aligned with customer needs or hearing the diverse perspectives of our employees when I visit our teams across the world.<\/p>\n
\u2014by Andy Marks, editor, Executive Perspectives in The Wall Street Journal, Deloitte Services LP<\/p>\n","protected":false},"excerpt":{"rendered":"Global industrial electricity consumption has grown at an average annual rate of 4% since 20201 and is expected…\n","protected":false},"author":2,"featured_media":38319,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[130],"tags":[232,22368,2252,2356,22367,22369,7872,987,22370,6278],"class_list":["post-38318","post","type-post","status-publish","format-standard","has-post-thumbnail","category-abb","tag-abb","tag-abbn-eb","tag-ai","tag-automation","tag-ceo-perspectives","tag-chabbn","tag-energy-efficiency","tag-leadership","tag-senior-level-management","tag-synd"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ch\/116288410377215303","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/38318","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/comments?post=38318"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/38318\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media\/38319"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media?parent=38318"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/categories?post=38318"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/tags?post=38318"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}