In a wide-ranging interview, Abate tells Windpower Monthly why GE will reduce the number of turbine variants it offers, while concentrating its efforts – and its workforce – in markets where it is already successful.
He also sets out GE’s ambition to have the world’s best-running fleet as it ramps up turbine production to a projected half a million installed units, the scale of the challenge for the wind industry to meet the aspirations of the energy transition and his personal motives for trying to make that happen.
A policy gamechanger
Abate is in cheerful form as we sit down to talk near the venue in Copenhagen where WindEurope’s annual event is already in full swing. The buzz of the wind industry coming together to talk, learn and forge deals is palpable and he’s clearly enjoying it.
A ‘gamechanger’ is, perhaps, too often used as a descriptor in an industry well-versed at showcasing technology innovations, but it is rarely directed at the policymakers whose decisions so dramatically affect the sector’s fortunes.
However, Abate describes US President Joe Biden’s landmark Inflation Reduction Act (IRA), made law last summer, in exactly those terms, and with good reason.
He thinks the time of action has finally arrived and that IRA means “no longer talking about it, no longer describing it, or putting scenarios in place". Instead he describes the disposition of Biden’s government as: “let’s start building it”.
He says: “As a global company, the [IRA] has taken a lot of our attention as we believe the policy is a gamechanger and is going to double the US market in the next ten years, versus its size… over the last ten.”
The future impact of IRA in the US is an opportunity not to be missed and GE – which claims the accolade of more than 50% of turbine installations in the country last year – plans to have a seat at the top table.
Abate says: “When you think of the impact…as they execute this policy; we have to be front and centre there. To really deliver for our customers in that market is key.”
Given the setting of our interview, Abate is also keen to make clear that GE’s aspirations in the US do not mean it is uninterested in Europe, or that it only wants to be a North American company and he points out that it has one third of the market share in Spain and India.
But it is becoming clear where GE’s main focus lies as the onshore CEO begins to set out the company’s strategy to slim down and reduce complexity across the business.
He says: “In markets where we're not competitive we just have to be honest about that and trying to be everything, everywhere sub-optimises our true potential. We’re just playing more to our strengths with the customers and partners we’re successful with.”
Abate continues: “In the near term, part of our turnaround is removing structural costs from our wind business while it grows. And we're able to do that because we're focused on fewer products, core customers, in core markets. And that will turn us to be profitable quite soon.”
Manufacturing outlook
GE subsidiary LM Wind Power manufacturing facility (Image credit: LM Wind Power)
The race is on to create the most attractive policy conditions for a rapid expansion of renewables, including wind power, and some might argue that the EU’s Net Zero Industry Act proposals lag behind the concrete legislation that now exists in the US.
Despite GE’s interest in the market, there are no immediate plans for new manufacturing facilities in Europe in the near future.
Abate says the company already has a large manufacturing footprint in Germany and Spain, as well as jobs in other EU states. But as for building more factories, he says of the EU proposals: “As the details – country by country – and the incentives become clearer, those decisions will be made.”
There will be “chapters” of GE’s investment decisions and “longer term” opportunities for Europe, but the US will come first.
He says: “The US just passed the IRA and there's only so much capital you can deploy. And it's clear with a market that's doubling [in the US] and now with manufacturing tax credits, that if you're going to deploy a dozen blade moulds – let's try the US right now.”
‘Concentrations of practice’
It is a similar picture for jobs. Asked if he expects onshore wind jobs at GE to grow in Europe in the next couple of years, Abate says: “Broadly speaking, yes. In the near term, no.”
In fact, Abate lays out GE’s plans to restructure the workforce along new principles.
He adds: “My view of the industry…is we've become too complex. I'm trying to simplify our organisation to do engineering in more concentrated spots. We were doing engineering design work in 20 different locations but the physics are the same anywhere on Earth. It was sub-optimal.”
Abate describes the restructuring of engineering jobs as ‘concentrations of practice’ and says they will help GE design better turbines as well as integrate knowledge learned from fleet operations into future designs.
He says: “If I have people spread out all over the globe, it's harder to do.”
What the IRA means for GE
It is not hard to see why GE wants to concentrate so much of its attention on home turf in light of Biden’s legislative leap.
Before it was passed, production tax credits in the US – which started at 100% – had fallen to 80% in 2022 and would have been cut further, to 60%, this year.
But they have been reset to 100% for a minimum of ten years by the IRA, depending on fulfilment of climate targets.
The legislation also contains provisions to add an additional 10% in tax credits for buying a turbine produced in the US and another 10% if developers build a project in a depressed energy community, such as the Midwest where coal plants are shutting down.
Abate says: “That subsidy went from 60%, on its way to zero, to 120%. That doesn't come to us, it comes to our customers, so that drives the economics of the project. But it’s very clear what that value proposition is.”
He adds: “In addition to that, if you invest in manufacturing capability in [the US], for the major components; blades, towers and nacelles – there are manufacturing tax credits.”
Innovation versus complexity
GE's Cypress turbine (Image credit: Rein Rijke)
Earlier this year, Abate said GE’s turbine offer to customers had become too complex and that it would reduce rotor variants to four and tower variants to nine by 2025.
While he will not be drawn on the specifics of the phase outs, Abate makes a clear case for change.
He says: “In one European country we had over 40 tower variants. If you're a supplier and every week you're getting a different drawing; it requires you to change your toolpath, or to weld it differently. What does that mean for the ability of the supplier to [produce] quality?”
He continues: “In the spirit of trying to innovate…we actually increased the rate of complexity and that was not digestible for the global supply chain.”
GE has one eye on a future in which it scales up from more than 50,000 turbines installed worldwide to 500,000.
Abate says: “We're stepping back and saying: ‘What does our fleet look like when it's 500,000?’ If you're going to have half a million units, you don't want half a million different problems. That doesn't mean you don't innovate; you're just doing it in a more mature way.”
He thinks the current complexity of GE’s offer is a legacy of the years before the IRA was passed.
Abate says: “You could describe it as an industry that was catching a falling knife. Each year, you knew the revenue coming into the industry was going to be less and the response to that was a lot of innovation and complexity in the supply chain. And that's resulted in financial challenges for the OEMs. I think you're seeing a reset going on, with a more mature focus around quality.”
Instead of offering the widest range, Abate says GE’s ‘North Star’ will be to have “the world’s best-running fleet” because he thinks there is no point in deploying half a million turbines if they do not run productively “decade after decade”.
The wind industry’s challenge
The scale of the challenge set by policymakers for the wind and wider renewables industries to meet the ambitions of the global energy transition is eye-watering, and Abate does not shy away from spelling it out.
He says wind was responsible for 100TWh of energy on the grid 20 years ago and has risen to 1,900TWh today.
Abate explains: “For the next 20 years, for us to deliver on energy transition goals, it needs to be 13,000 [TWh].
He continues: “Every industry solution is to lean into the electrical sector. So as we plot this out, there just isn't enough zero-carbon born electricity to solve this problem fast enough.”
‘A moment of silence’
There is a kind of reverence, almost, to how Abate describes the historic passing of the IRA legislation which has transformed the industry’s outlook in the US.
“It was August and our team was part of ACP (American Clean Power) and they all sort of took a moment of silence when it passed. Their point was – the future is different now.”
But beyond his professional motivation for helping GE deliver its business goals and capitalise on the wide vista the IRA has opened up for the company, Abate is also driven by more personal imperatives.
He says: “I have four kids and this is important to me. It's a noble cause and I think we're on the right side of playing this through.”
Look out for a podcast version of the full interview with GE’s Vic Abate in the coming weeks
