What the $11B Hitachi ABB Joint Venture Means to Microgrids

July 6, 2020
Several global technology giants are vying to capture the fast-growing microgrid market, and now the coming together of two — Hitachi and ABB — could reconfigure the landscape.

Several global technology giants are vying to capture the fast-growing microgrid market, and now the coming together of two — Hitachi and ABB — could reconfigure the landscape.

Japan-based Hitachi and Switzerland-based ABB finalized a new $11 billion joint venture last week that will become home to ABB’s Grid Edge Solutions, its arm that develops microgrids. The acquisition encompasses all of ABB’s power grids business. 

It’s too early to say exactly how the venture — called Hitachi ABB Power Grids — will change what the Grid Edge Solutions division offers, but the companies intend to leverage their respective strengths. In the microgrid realm, that means pairing ABB’s automation technology with Hitachi’s digital platform.

The new entity also strengthens Grid Edge Solutions’ geographic reach and gives it greater access to Japan, home to Hitachi and the third largest economy in the world.

“We see a great opportunity for collaboration across geographies, governments, business and other stakeholders to seize this moment and drive a greener economic recovery by investing in a sustainable energy future, underpinned by modern infrastructure including power grids,” said Maxine Ghavi, senior vice president and head of the Grid Edge Solutions Business at ABB.

How business models or products may change is still unclear because of limits on the ability of the companies to collaborate before the deal closed. 

Kid in a candy store stage

But now, Ghavi said, they are entering the “kid-in-a-candy-store” stage as they examine technologies the two companies can bring together and begin discussions with customers about options. “As it relates to the microgrid business — the Grid Edge Solutions business — it really just means more capabilities that we can leverage and bring to our customers.”

What will result “depends a lot on our customers — what their needs and requirements are…or what other additional benefits they’re looking for,” Ghavi said. 

To be clear, microgrids will be just one piece of Hitachi ABB activities. But many of the other technologies and services it envisions are increasingly intertwined with microgrid development, such as e-mobility, energy storage, data centers, and smart cities. 

“To our customers, the market and the whole energy transformation is expanding. They don’t just want a microgrid. They don’t want just resilient power and quality power. They want a lot more services and a lot of these services are digital,” Ghavi said in an interview with Microgrid Knowledge.

Cordova, Alaska microgrid. Courtesy of Hitachi ABB

Both companies are long-time players in the microgrid space. ABB was an early entrant in remote microgrids globally. Hitachi began developing microgrids in Japan following the Fukushima earthquake and tsunami in March 2011. Four years later Hitachi entered the then-emerging North American market. But faced with lengthy project lead times and fierce competition from companies like S&C Electric, Schneider Electric and Siemens, the North American division shutdown in 2017. 

In late 2018, Hitachi and ABB announced that they were working on the new joint venture, which gives Hitachi a 80.1% stake at a purchase price of US $6.85 billion. Hitachi intends to acquire the remaining 19.9% stake of Hitachi ABB Power Grids after 2023. 

The joint venture kicks off with $10 billion in business volume and 36,000 employees across more than 90 countries, with its main office in Zurich, Switzerland.

Big footprint, long history

Both companies also bring to the table a large global footprint and long history in conventional energy technology. Hitachi was founded in 1910; ABB traces its roots back to a manufacturer of electrical lighting and generators in the late 1800s.

Time will tell how the joint venture plays out in a microgrid market that is now attracting more competitors, large and small, trying to position for new opportunties as the economy emerges from COVID-19.

In press statements and blogs, Hitachi ABB leaders identify opportunity in the potential ramp up of government infrastructure investment, the drive for lower carbon energy and growing demand worldwide for electricity.

Claudio Facchin, CEO of Hitachi ABB Power Grids, wrote in a blog on the joint venture’s site, that he sees the upheaval of the pandemic as creating fertile ground for change and innovation in a year that has “rocked us on all levels, socially, environmentally and economically.”

“The 2020’s will go down in history, as an unprecedented social and economic global challenge and a time of human invention, innovation and societal progress. The current crisis has touched almost every human and organizational structure on our planet, but we have learned to collaborate more,” he said.

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About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is the editor and founder of EnergyChangemakers.com. She is co-founder and former editor of Microgrid Knowledge.

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