Hitachi ABB Power Grids, the behemoth joint venture firm officially launched last year when Japanese technology conglomerate Hitachi acquired a majority share in Swiss conglomerate ABB’s Power Grids business, will be known as “Hitachi Energy” starting in October 2021. The name change reflects the firm’s business evolution amid a rapidly evolving energy landscape, the company said.
Hitachi ABB Power Grids’ name change to “Hitachi Energy Ltd.” was formally registered on June 30 but announced on July 1—marking exactly one year since Hitachi and ABB closed their $11 billion deal to officially launch Hitachi ABB Power Grids. The deal was notable when it was first announced in December 2018 owing to ABB’s divestment of Power Grids, a lucrative division that pioneered several grid technologies and had for years accounted for more than a quarter of ABB’s revenue.
Hitachi today holds an 80.1% stake in the Zurich-headquartered Hitachi ABB Power Grids joint venture, while ABB holds the remaining 19.9% stake, but as announced last year, ABB also holds a pre-defined option to exit the retained shareholding three years after closing—or by 2023. On Thursday, notably, Hitachi ABB Power Grids also announced that when it officially adopts the name “Hitachi Energy” in October, it will also change its corporate brand to the Hitachi brand and “use it for external and internal communications.”
Going ‘Beyond the Grid’
According to Claudio Facchin, former head of the division when it was rooted at ABB and who now serves as CEO of Hitachi ABB Power Grids, the name change reflects the company’s response to a rapidly evolving energy landscape and highlights a potentially new direction for company growth “beyond the grid” to unlock new opportunities in emerging areas through an integration with Hitachi’s core digitalization offerings. “The energy landscape continues to evolve and so do we,” he said. “With our new name ‘Hitachi Energy’ we are broadening our commitment to creating further value for customers, our employees and society. The past year has been demanding for everyone, but we look forward with optimism.”
Technology will remain the core business of the company that currently employs about 36,000 people in 90 countries. According to materials presented during Hitachi’s investor day on June 8, the Power Grids business unit—and its core offerings in grid automation, high-voltage components, grid integration, and transformers—brought in 68% of Hitachi’s energy-related revenues in fiscal year 2020. In those materials, executives also highlighted Hitachi ABB Power Grids’ leading market share in the world’s transmission and distribution sector.
Over the past year, despite the pandemic, Hitachi ABB Power Grids marked innovative “firsts.” In December, for example, it launched a year-long demonstration in Scotland of the world’s first hybrid solution to combine a STATCOM (static compensator) with a synchronous condenser—combining traditional technology with power electronics—to provide a fast-reaction spinning capacity and short circuit control. It recently also won crucial orders for its proprietary HVDC (high-voltage direct-current) technology based on voltage sourced converter technology from the 3.6-GW Dogger Bank Wind Farm, which is under construction in the North Sea.
However, the company noted the pandemic has prompted changes to the energy market. While governments are promoting economic recovery policies in conjunction with green policies, the past year’s economic stagnation and declining capital investment has affected a shift toward digitalization.
New Target Markets
To grasp emerging opportunities, such as in the growth of asset management solutions and the digitalized operation of energy networks, Hitachi intends to strengthen Hitachi ABB Power Grids’ revenue growth through an integration with Hitachi’s Lumada digital solutions, services, and technologies offering, slides from the June 8 event suggest. Hitachi also anticipates a “collaboration” between Hitachi ABB Power Grids and GlobalLogic, a U.S.-headquartered digital engineering services firm that Hitachi announced it would acquire in March. In addition, Hitachi is looking to establish a “shift to service and solution-oriented businesses.” That could entail a “stronger” energy management service business, and an expansion in its remote monitoring service, and maintenance and service offerings.
Looking ahead, Hitachi and Hitachi ABB Power Grids will also jointly target new markets for future growth. These include Europe, where electrification of transportation is burgeoning; in the Middle East, where renewable energy uptake and smart infrastructure are speeding up; in India, where grid digitalization is picking up; and in China, which is spearheading an energy portfolio transformation that includes a decarbonized transportation sector.
North America is also a prospective growth region, executives said, owing to its progress in digitalization. So is Japan, where Hitachi is headquartered, and where opportunities may exist for grid stabilization and regional interconnection through digital technologies. The June 8 slides suggest Hitachi ABB Power Grids’ most lucrative target markets are in microgrids, electric vehicle charging, data centers, HVDC, and railways.
The Connect Between Digitalization and Sustainability
On Thursday, Hitachi ABB Power Grids also highlighted the fight against climate change as a key motivation for its “business evolution.” Citing the International Energy Agency’s (IEA’s) Net Zero by 2050 report, the company noted: “By 2030, the world economy is expected to be some 40% larger but consuming 7% less energy to be on track for net zero in 2050. By this time ‘the energy sector will be dominated by renewables’ and ‘electricity will account for almost 50% of the total global energy consumption’—up from about 20 % today,” it said. ”An equitable and sustainable energy transition is at the center of this global challenge, where electricity will be the backbone of the entire energy system.”
“With climate change and increasing natural disasters, there is a need to solve three social issues worldwide: environment, resilience, and security and safety,” noted Toshiaki Higashihara, executive chairman and CEO of Hitachi on Thursday. “Hitachi ABB Power Grids provides a variety of solutions that solve these social issues, and by changing the company name to Hitachi Energy, we are further strengthening our commitment to the realization of a sustainable society. Hitachi and Hitachi Energy will contribute to solve social issues and improve people’s [quality of life] by realizing social innovation in the energy field with customers and partners.”
Keiji Kojima, president and chief operating officer at Hitachi, meanwhile pointed to the growing connect between sustainability and digitalization. “To realize a sustainable society, the use of digital technology is becoming indispensable in all fields,” he said. “In the energy field, power grids are expected to be at the core of innovation since they have high affinity with digital technology, and I am confident that Hitachi Energy will lead this innovation. Hitachi will combine digital technologies such as Lumada with Hitachi Energy’s advanced energy technologies to provide innovative energy solutions that create social, environmental, and economic values.”