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Perspectives 01-07-2020

8 min read

Creating a new global leader in power systems

How does a new joint venture contribute to today’s global energy landscape? Four leaders from across Hitachi and ABB Power Grids share their thoughts. 

In this Perspective, we hear from the Chairmen of the Boards of Hitachi and ABB, as well as the President & CEO of Hitachi, and the Head of Hitachi’s Energy business.

We learn about why they believe that now is the right time to be creating Hitachi ABB Power Grids Ltd., a new global leader in power systems. And how combining capabilities in power systems and digital technologies, the new business is expected to contribute more value for customers and towards an overall sustainable society.

Message from Hiroaki Nakanishi, Executive Chairman and Executive Officer, Hitachi Ltd.

When I visited ABB Ltd. in 2011, I was inspired by their business philosophy and technologies. Since then, I have devoted myself to deepening the strategic partnership of ABB and Hitachi. Following the establishment of Hitachi ABB HVDC Technologies, Ltd. in 2015, I am very pleased that the partnership will again prosper through the establishment of Hitachi ABB Power Grids Ltd., with the world’s number one technology, and in expanding business globally.

The world is currently facing major challenges such as climate change and urbanization. Society 5.0, advocated by the Japanese government, is a society that will satisfy both the resolution of such social issues and economic development by utilizing a variety of data, taking advantage of innovative sciences and technologies.

Society 5.0 aims for a human-centric society where everyone can live dynamically, and its realization coincides with the achievement of the Sustainable Development Goals (SDGs) advocated by the United Nations. Therefore, the Japanese business community, including the Japan Economic Federation, which I have the privilege to chair, is making an all-out effort to realize it.

An essential component in achieving a sustainable society includes a power system, which is modern, resilient and flexible. Power systems underpin the successful integration of renewable sources of energy that are required to realize the world’s energy transition. I am proud that the world’s top power technologies of ABB’s Power Grids business, in combination with Hitachi’s wealth of achievements in digital technologies, is optimal for globally delivering the required innovations in power grids.

This new company has launched amidst the unexpected challenges of COVID-19. However, the response to the pandemic includes the increased use of digital technology at an accelerated pace all over the world, and electric energy is becoming an increasingly important lifeline. In addition, movement towards a decarbonized society will accelerate rapidly.

This new company will devote its energy to the realization of “Affordable, Reliable and Clean Energy,” the seventh goal of the SDGs, by meeting such needs with innovations in power grids.

Message from Peter Voser, Chairman of the Board, ABB Ltd.

The launch of Hitachi ABB Power Grids represents an exciting moment, and it comes at a critical juncture for its customers and society as a whole.

The world of energy infrastructure is changing rapidly, with a shifting customer landscape, a growing need for new financing strategies, and increased government involvement. In this context, ABB believes Hitachi is the best owner for Power Grids. As a stable and committed long-term owner, with which ABB has had a strong business partnership since 2014, Hitachi will further strengthen the business, providing it with access to new growth markets and financial offerings. Hitachi will guide Power Grids in the next stage of its development, building on the leading technology and digital innovation that have been the hallmarks of its past ownership under ABB. Both Hitachi and ABB can take pride in a long and rich heritage of groundbreaking power technologies, which have improved the lives of millions of people over the decades.

ABB will initially retain a 19.9 percent equity stake in the joint venture, allowing for a seamless transition and the continued focus on strategic execution. Our joint venture will significantly enhance PG’s offering to customers seeking to adapt in this period of immense change. It will draw on the deep sense of responsibility for customer success that Power Grids has developed over the course of more than a century of technology leadership.

Digitalization opens the door to new opportunities across the entire energy value chain, enabling new business models and creating value on an unprecedented scale. Working with Hitachi will strengthen Power Grids’ ability to leverage these opportunities and pave the way for many more. I particularly admire Hitachi’s focus on social innovation, which has made valuable contributions on many levels.

In Hitachi ABB Power Grids I see almost boundless possibilities for better serving customers, while providing vital support for a more sustainable society and the prosperity of future generations.

Message from Toshiaki Higashihara, President & CEO and Director, Hitachi Ltd.

In 1910, Namihei Odaira, the founder of Hitachi, Ltd., established the company to significantly contribute to the development of Japan, which was still an emerging nation at the time. His determination has been successively passed down at Hitachi as the corporate mission: “contribute to society through the development of superior, original technology and products.”

Hitachi has been boldly innovating a variety of new technologies and businesses since its founding. It is characterized by the three elements of operational technology (OT), accumulated over more than 100 years; information technology (IT), which Hitachi has been cultivating for more than 60 years; and a variety of products leveraging its characteristics. This means business to achieve sustainable society using Hitachi’s digital technologies, in a wide range of social infrastructures.

In an environment where digital technology is dramatically changing society for the better, Hitachi is focusing on Social Innovation business, leveraging its characteristics. This means business to achieve a sustainable society using Hitachi’s digital technologies in a wide range of social infrastructures.

For example, in the Copenhagen Metro project, Hitachi provided a railway system that automatically adjusts train operation diagrams according to passenger usage, in addition to providing train cars. As a result, this system has simultaneously improved the convenience of passengers, reduced environmental burdens, and increased profits for the railway operating company.

Hitachi aims to improve customers’ social, environmental, and economic values through its Social Innovation Business, and contribute to improving customer’s corporate value and people’s overall quality of life.

Due to the COVID-19 pandemic, the use of digital technology will accelerate in a variety of societal situations going forward. When creating a digital society, it is important to include certain features, such as convenience, peace of mind, and physical and emotional fulfilment.

To bring about this change, referred to as human-centric innovation, the process known as collaborative creation will create new value by sharing issues, visions, and a variety of data with customers and partners. This is a process that Hitachi’s Social Innovation Business emphasizes. There is also Lumada CPS (Cyber Physical System) which creates new value from a variety of data.

With electric energy becoming an increasingly important lifeline, this new company will lead social innovation in power grids through collaborative creation by combining the world’s most advanced power grid systems with Hitachi’s digital technology, leading the achievement of a sustainable society in the aspect of energy.

Hitachi’s corporate message, “Hitachi Social Innovation is POWERING GOOD,” expresses Hitachi’s intention to devote its fullest to realizing a sustainable society through its Social Innovation Business along with customers and partners. We look forward to achieving a sustainable society together through the power grids business. Let’s power good together.

Toshikazu Nishino, Executive Vice President and Executive Officer, Hitachi Ltd.

We invited Nishino to share his thoughts on how innovation, digital energy platforms and culture will all play a role in shaping Hitachi ABB Power Grids as a new global leader in power systems.

How do you see the involvement of customers and partners within concept development in relation to “co-creation”?

To solve major challenges facing humanity, such as climate change and resource depletion, the perspective of how to enhance social value and environmental value through business in the earth’s ecosystem is important, instead of regarding business as a simple enhancement of economic value. To enhance these three values, collaborative creation through the process of bringing a challenge to its resolution, and the creation of new value together with customers and partners, is the most effective means.

What is the expected role for the new joint venture within the future-oriented platforms for Hitachi? (e.g. energy / digital platforms)

The new company will be able to create optimum solutions to resolve essential challenges by analyzing customer data through the combination of the world’s top products and systems cultivated by ABB and Lumada Cyber Physical System, and other digital technologies innovated by Hitachi. We want to contribute to the achievement of a sustainable society by building stronger, smarter, and greener power grids through the provision of optimum solutions to customers.

How do you see the Hitachi culture and the Power Grids culture coming together? 

Both companies were founded in a copper mine about 100 years’ ago, are proud of their technologies and products, and have grown into world-class companies by actively advancing into wide-ranging businesses. And I feel that the histories and cultures are similar. Since establishing a strategic partnership in 2011, we have already built a deep relationship of trust. We will make it a company that will create innovations in power grids by promoting fusion between the new company and Hitachi.

Finally, what is your expectation from Perspectives?

We hope that Perspectives will become a catalyst for making innovations happen in electric power by introducing the opinions of a number of leading figures who actively participate in the global power industry. I personally look forward to seeing #Perspective become a place for co-creation.