Navigant Research Blog

With Alstom Bid, GE Steps Up T&D Competition

— April 30, 2014

The news that General Electric’s (GE’s) $13 billion bid to acquire Alstom SA has been accepted by Alstom’s board – coupled with Siemens AG’s announcement that they are considering a counterbid  – represents a clash of titans in the global marketplace for electricity generation and transmission and distribution (T&D).  For the last decade, that market has been led by three companies: ABB, Alstom, and Siemens.  GE, a huge global corporation with multiple business lines across finance, healthcare, and electric T&D, has focused its T&D business primarily on generation, digital energy software solutions, and some high-voltage system components, such as series compensation (SC) devices used to correct voltage loss and other instabilities on the electric transmission grid.

In 2012, GE announced a joint venture partnership and equity position in XD Group, a Chinese heavy industrial manufacturer that sells a full range of T&D equipment, substations, transformers, and high-voltage direct current (HVDC) transmission lines.  The deal not only opened up the booming Chinese T&D market to GE, but also allowed the company to white-label XD’s T&D system equipment for resale in other regions.  In my discussions with the Big 3 (ABB, Alstom, and Siemens) vendors at the recent Institute of Electrical and Electronics Engineers (IEEE) T&D systems trade show in Chicago, they mentioned that GE has become a significant competitor, signaling that the market structure has now morphed into a Big 4.

Mind the Gaps

However, I also saw that there are significant gaps in GE’s technical product lines and global manufacturing and installation capabilities, which need to be filled.  For example, flexible alternating current transmission systems (FACTS) solutions for voltage drop and power quality on transmission lines represent a $4 billion dollar market that continues to grow annually.  GE has traditionally provided SC solutions, but not the faster-responding static VAR compensator (SVC) and static synchronous compensator (STATCOM) solutions that are now being adopted as the aging transmission grid is being upgraded.  The Alstom acquisition is the perfect solution for filling that gap, as Alstom SA has manufacturing, design, and installation capabilities for SVCs and STATCOMs in North America, Europe, and Asia Pacific.  A broader discussion of this market and the FACTS technologies can be found in Navigant Research’s recent report, Flexible AC Transmission Systems.

At the time of this writing, it appears that the GE offer will be approved by the French government, and that Siemens is preparing a counteroffer.  ABB’s CEO has stated that his company will not enter this fray, but I am certain that ABB’s internal analysts are running the numbers and assessing the opportunity.  In this ongoing clash, the Big 4 all have a long-standing history of growth through acquisition.   However this works out, we can expect the market to sooner or later be whittled down to the Big 3 again.  These developments will definitely add color to my upcoming report on high-voltage transmission systems, which will be released later in 2Q.  Stay tuned.

 

High-Voltage DC Unlocks Distant Offshore Wind Sites

— February 24, 2014

Germany is on track to commission close to 1 GW of offshore wind in 2014 and will follow up with another 3 GW between 2015 and 2016.  Goals have been revised downward recently, but the government still aims to bring 6.5 GW by 2020 and 15 GW by 2030.  These ambitious installation levels are driven by strong government-backed renewables goals and supportive incentives, but also by a novel solution to the challenge that most of Germany’s ideal offshore wind sites are very far from shore – most over 75 km.  At these distances, losses are so great over typical high-voltage alternating current (AC) subsea transmission cables that they can negate the construction of a wind plant.

The solution – a first in the offshore wind market – is the construction of a network of oversized high-voltage direct current (HVDC) converter stations and connecting cables that will allow much of Germany’s pipeline of offshore wind plants to efficiently deliver power to the mainland.  Direct current (DC) is neither new nor novel.  Its use fell out of favor many decades ago as AC power was cemented as the market standard.  But growing need for electricity and the increasing distances required for some generation projects has sparked a rebirth.  These factors have also sparked fierce innovation and competition among power giants such as ABB with its HVDC Light, Siemens’ HVDC Plus, and Alstom Grid’s MaxSine, each using advanced voltage source converter (VSC) technology.  Likewise, a relatively small number of companies provide large HVDC cables for subsea use, resulting in shortages and order backlogs.  This is prompting new entrants into the market and advances in cable technology, such as crosslinked polyethylene (XLPE) HVDC cable.

Towering Turbines

Offshore wind is a leading driver of the HVDC renaissance, and the scale of the effort is impressive.  The larger units look like offshore oil rigs, topping 93 meters in height and weighing upwards of 9,300 metric tons (not including foundation).  In the first German stages, the HVDC buildout is composed of four grid clusters in the North Sea known as SylWin, HelWin, BorWin, and DolWin. These initial phases combined provide around 5.9 GW of capacity and utilize around 800 km of undersea HVDC cable.  Multiple wind farms connect to the converter clusters in order to share and reduce the overall cost to build the HVDC network.

Germany is not alone.  The United Kingdom is also making enormous progress deploying offshore wind farms and will rely on HVDC for many new wind plants.  The first wind plants under the United Kingdom’s Round 3 offshore wind development are entering construction in 2014 at distances from shore that range from 30 km to 185 km. Close to 20 GW are located beyond 100 km and will rely on HVDC.  By 2020, as much as 30 GW of offshore wind will likely be connected by HVDC globally.  Corresponding HVDC export cable route lengths are expected to reach roughly 4,000 km.

The downside to HVDC is its high cost, driven by the large converter stations.  The challenge to the offshore wind industry, the hardware providers, and grid integrators is to bring costs down by standardizing hardware and voltages and by finding efficiencies of scale in converter component manufacturing and offshore construction.

More detailed information and analysis of the HVDC technology, deployments, cable providers, transmission integrators, and the pipeline of wind plants and their developers connecting to the systems are available through the following Navigant Research reports:  International Wind Energy Development: Offshore Report 2013, High Voltage Direct Current Transmission Systems, and Submarine Electricity Transmission.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Electric Vehicles, Energy Storage, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Smart Grid Practice, Smart Transportation Practice, Utility Innovations

By Author


{"userID":"","pageName":"High Voltage DC Transmission","path":"\/tag\/high-voltage-dc-transmission","date":"9\/1\/2014"}