debates, decisions and actions of our industry are increasingly the subject of
intense public interest, and there is a growing sense of awareness that man –
and our planet – is at a watershed. That action is imperative.
are here to hear about – and explore – the products, innovations, visions, strategies
and partnerships that are needed to shape our industry’s future. That are available
now. Or are in the pipeline for tomorrow and the day after.
Now – I am obviously not Al Gore, and I didn’t come armed with dramatic slides,
films and statistics to illustrate my remarks. We all know the messages. And we
believe them – and respect their urgency. But my message today has a positive
flavor. And I would like to preface them with the words of philosopher Karl Popper.
At one point
in his long life, he said: "We humans have always mistreated and exploited our
environment. Technology based on science is the only thing that can help us repair
this damage. This is an endless and extremely important task."
– if not most – of these challenges are being driven by our drastically changing
we face an exploding global population – with an increase of 1.1 billion people
by the year 2020. And the staggering projection of seeing 9 billion people on
our planet within less than 50 years.
the first time in human history – more people will live in cities than in rural
areas. Just 8 years from now – in 2015 – we expect to see 15 new megacities with
populations over 10 million.
this demand grows, we also see that fossil fuels will continue to dominate as
energy sources. While shares of nuclear and renewable sources are expected to
rise – it is estimated that fossil fuels will still make up a solid 65 percent
of the mix. And in view of our endangered climate – we will have to deal with
the carbon and other multi-pollutant emissions from these fossil-fired plants.
At this point, energy security and climate security seem to be on a collision
has a strong climate policy – and we believe the most effective approach for industry
suppliers is to provide a diverse portfolio offering all technical possibilities
for reducing greenhouse gases efficiently and cost effectively.
we know, our industry is already able to achieve efficiency improvements in conventional
power plants that have a significant impact on emissions from both existing fleets
and new plants. Likewise, wind power, demand-side management measures, and upgrading
existing nuclear plants can all be significant contributors toward slowing emissions
the expected dominance of fossil fuels in the energy mix, carbon-capture technologies
for both pre- and post-combustion applications has major potential for new plants
as well as retrofits.
In the case of IGCC, carbon would be captured in a pre-combustion process – before
the syngas is fired in the gas turbines. In
the case of pulverized coal, carbon would be captured postcombustion– which is
considered technically more challenging today. While IGCC seems to be a promising
technology and better positioned for carbon capture, in effect one is operating
a power plant with a chemical plant attached –posing another set of challenges.
Generation spends 5 percent of revenue on research and development – and a large
share of that goes into programs to further improve the efficiency of conventional
average efficiency of the U.S. coal-fired power plant fleet––built some 30 to
40 years ago––is about 35 percent. Today’s state-of-the-art technology boosts
efficency rates to 47 percent for hard coal–– and 58 percent for gasfired plants––providing
a major lever for mitigating CO2 emissions.
China is also taking impressive steps toward improving efficiency and bringing
technologies to the next level.
Among the renewables, wind energy is especially practical. Even though it is a
relatively immature industry, it is already proven. And the industry has gone
beyond the learning curve and understands the costs. By definition, wind is not
a fuel, but it also doesn’t emit carbon, so it is very attractive. And that makes
it a sensible and attractive solution for increasing our overall capacity of renewable
energy source – even without benefiting from any carbon credit.
present, we believe that solar is not as cost competitive as other solutions in
the existing renewable portfolio. But we are also convinced it has attractive
potential in the longer term. The current worldwide installed solar capacity in
2005 was 3 gigawatts – versus 60 gigawatts for wind. And projections say this
will increase to 11 gigawatts by 2010 and 50 gigawatts in 2020.
indicates a market in the range of 25 billion dollars per year between 2015 and
for Zero Emissions
the longer term, there are a number of options for a future power generation mix
that has very low carbon or even zero carbon emissions.
sees three categories of technology options:
Preferred dispatch by renewable energies, such as wind power and solar thermal.
solar power – or CSP – is an emerging technology that has the potential to produce
economical power in the right locations.
Intermediate load/peak load capacity based on highly efficient and flexible gas-fired
combined cycle plants that ensure stable grid operation while emitting lower levels
of CO2 –because natural gas has a lower carbon content.
third: Zero-carbon base-load solutions include clean coal plants with pre- or
postcombustion CO2 capture technology – as well as nuclear and hydro power.
of us in this room want stranded assets. Our industry has a number of prerequisites
when it comes to CO2 capture.
These include defining “capture-ready” steam power plant designs; providing input
on what CO2 storage liabilities are going to be; and participating in full-scale
demonstration projects to prove the concept, reliability and availability of CO2
cleaner power generation is only part of the overall energy solution. Let’s not
forget the power delivery networks. For example, the U.S. transmission and distribution
system had been the envy of the world for decades. But significant under-investment
over the past two decades has fed growing concerns about grid reliability.
than 65 percent of the country’s transformer fleet will be over 30 years old within
the next 5 years.
good news is that many in this room are not just thinking about transmission –
but taking action. Right now there are over 300 projects – most rated at 345 kV
or higher and some 800 kV projects – on file at FERC for transmission corridor
status under EPACT 2005.
look at tomorrow
Siemens is already
hedging its bets about what the future holds for our industry – and is doing two
important things to address that future. First of all, we are actively working
with legislators in various markets to explain the technologies and timing of
these technologies to slow, stop and reverse the growth of greenhouse gas emissions.
And second, we are shaping our technology, product and service portfolio in order
to be optimally positioned for what we believe will be the new growth segments.
In other words: We are putting our money where our mouth is. Just take a look
at how we have changed our business portfolio over the past eight years – which
is a relatively short time.
in 1998, we were pretty much focused on what would be considered the “traditional”
power generation business. And – of course – that is still a very important part
of our business. We continue to invest heavily in research and development to
further improve the efficiency of our conventional power generation components.
at the same time, we have also expanded our portfolio significantly in three key
areas. For one – over the past two to three years, we have acquired air pollution
control businesses that are experiencing phenomenal growth in helping our customers
deal with conventional pollutants like Nox, Sox and particulates.
For another, we purchased a wind energy company and are significantly expanding
that business to meet the booming market demand.
– addressing the third key sector – we now own one of the world’s most promising
coal gasification technologies, which we believe will be an important catalyst
for future carbon capture and storage.
major challenge we all face in building a diverse mix of power generation sources
is one that we are perhaps least prepared or equipped to handle. This particular
issue was never so potentially disruptive in the past. I’m talking about the growing
scarcity of resources – driven by the exploding growth in developing countries.
are consuming ever larger shares of the material resources we need for our industries.
Goldman Sachs, the BRIC countries – Brazil, Russia, India and China – will increasingly
define the world’s new economic center of gravity. By 2025, the GDP of these four
countries could equal half the aggregate level of the G-6 nations – the U.S.,
Japan, Germany, Britain, France and Italy. And by 2040 – assuming strong and sustained
growth rates in the BRIC countries over coming decades – they could overtake the
G-6 altogether. As international trade further expands and integrates, we will
see a truly global, just-in-time supply chain that will have a major impact on
how, when and where we get our materials. Or even if we get our materials. Geopolitical
influences on just who gets the resources are almost certain to challenge our
current business models.
these factors are impacting us at all points along the supply chain. For suppliers,
limited capacities – particularly in engineering and manufacturing – for key power
plant components like pumps and piping – combined with high raw material prices
are resulting in long lead times and high price levels for the components. And
power plant manufacturers face limited capacities in manufacturing, engineering
and project implementation.
addition, we are seeing soaring raw material prices. From 2005 to 2007 – in a
mere 18 months – the prices for piping, forging and casting jumped nearly 20 percent.
And high steel and copper prices are another story. This is raising potential
conflicts with customer and supplier agreements.
you – the customer and electricity provider – are experiencing sticker shock when
it comes to the prices you are paying. Our customers are reporting price hikes
that range from 20 to 50 percent – and that just in the past 18 to 24 months.
This also means
that you have to plan further out than ever before – in order to ensure you have
the power to meet demand.
issue that plagues us all is a shortage of qualified labor – especially in manufacturing,
engineering and project implementation. Multinational companies with global supply
chains – like Siemens – need to take on this challenge by utilizing all options
at their disposal. Our procurement strategy must reflect global market demands.
For example, we leverage our Chinese joint venture to optimize manufacturing capacities
– and draw on the pool of qualified engineers in India for R&D activities. And
as we move into a global economy – we must continue to give top priority to maintaining
the highest quality and safety standards. Nothing less is acceptable.