ABB Sees Growth Through Megatrends, Disruptive Technologies

CEO Hogan Keynotes ABB Automation & Power World 2012

By Aaron Hand

ABB Automation & Power World 2012

Despite the series of "unprecedented events" over the past year that include the tsunami in Japan that led to the Fukushima disaster, Europe's financial crisis, slowing growth in China and failure of the budget "supercommittee" in the United States, players in the industrial automation and electric power industries should be able to look forward to a robust business climate for 2012 and beyond, according to Enrique Santacana, region manager, ABB North America.

Speaking at the Tuesday morning general session at ABB Automation & Power World in Houston, Santacana pointed to several trends that should help sustain a powerful economic growth climate: energy efficiency; increased availability of natural gas through fracking; exponential growth in data-driven processes; grid and infrastructure investments; and industrial productivity. "In this global economy, if you're not investing in productivity improvement, you're going out of business," he argued.

As it happens, every one of those growth trends falls in ABB's "sweet spot," Santacana said before he introduced CEO Joe Hogan to detail ABB's work in all of these key areas.

Energy efficiency, which Hogan called "the greenest form of energy you can think of," is a key focus for ABB. "Last year our low-voltage drives saved 260 million mW/h," he said, explaining that the savings were achieved by matching the motors to the drives. "It's really that simple."

It's more simple for ABB these days, now that it's finding synergy with recent acquisition Baldor, whose motors are coming together nicely with ABB's drives. "Motors use 40% of the energy in industry," Hogan said. "If you put low-voltage drives on every motor, you would save $40 billion."

Data centers were a key talking point for Hogan, who pointed to that market for incredible potential energy savings. Data centers use 100 times more power than a similar-sized office building, he said, which in itself makes the potential huge. Added to that is the exponential growth in data-driven processes. "Every time someone develops a new app, you have to build a data center somewhere," Santacana said.

"Data centers are critical for modern economies," Hogan said. "You'll see so much innovation from data centers in the next 10 years."

Part of that innovation is likely to come in the form of dc power, which will be a "great disruptor," Hogan said. In data centers, for example, energy efficiency could be improved 10% to 20% over an ac system. Utilities have used dc power distribution for a long time, but the concept is relatively new to data centers, Santacana explained later at a media briefing. In practice, using dc power would call for fewer rectification steps, leading to fewer losses and better efficiency, he said.

The planet used almost 18 trillion kWh of electricity last year. Although the world is standardized on ac power, it's time to take advantage of dc's ability in many areas to improve power efficiency, Hogan said.

ABB doesn't advocate that dc take over everything, Hogan explained, but there are places where it makes sense. "The need for dc power is on the rise," he said. "We need to take advantage of every kilowatt of power—ac and dc."

Finding and exploiting such disruptive technologies is part of ABB's growth strategy, Hogan said. Another part of the strategy is looking for megatrends, he added, such as within the smart grid, power electronics, mechanical equipment, and oil and gas. "We want to be in areas where the market's growing," he said. "We look for markets where the wind is blowing."

One of the markets that ABB is putting more emphasis on is the United States, which remains by far the largest economy, still about double that of China. "By far the most momentum we see in the world right now is occurring in the United States," he said.

Listing the $100 million of investments made so far by ABB Technology Ventures, Hogan noted that six of the eight companies have been from the U.S. "It shows you just how innovative this country still is."

The days of "labor arbitrage," in which companies run to China to take advantage of lower labor costs, are coming to an end, Hogan argued. Companies are organizing instead around geographies, enabling faster response times for customers and more localized products and solutions.