CERAWeek: FERC chairman lays out demand challenge facing US grids

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Eklavya Gupte:

Welcome to Energy Evolution. I'm Eklavya Gupte, and this is a very exciting week for energy. CERAWeek is underway in Houston, Texas. And my co-host, Taylor Kuykendall, will be bringing you interviews with featured guests from the sidelines of the event.

 

Taylor Kuykendall:

That's right, Eklavya. CERAWeek is one of the largest and most influential energy conferences in the world. It brings together world leaders from various sectors, politics, and more. And I'll be on the ground bringing our listeners several special episodes over the next few days.

 

Eklavya Gupte:

Excellent. Well, let's find out what you have for us today.

 

Taylor Kuykendall:

All right. We are here live at CERAWeek. I'm with Siemens Energy president of North America, Rich Voorberg. Rich, thank you so much for joining Energy Evolution.

 

Rich Voorberg:

It's my pleasure. Look forward to the discussion.

 

Taylor Kuykendall:

Awesome, thank you so much. And just for our listeners who aren't familiar with Siemens Energy, just tell us a little bit about yourself, and the company's role in energy transition.

 

Rich Voorberg:

Well, I've been in this energy business for my whole career, so almost 35 years now, always with the same company. And Siemens Energy is just a unique company because we go right across the whole spectrum when it comes to energy from traditional powers, gas turbines, steam turbines, nuclear, through the transmission, so the transformers, the breakers, high-voltage DC.

And then on the other side we've got our transformation of industry, which is our oil and gas, but in there we put a solutions business. We also put our hydrogen business.

And then our fourth pillar is the wind business, so our wind turbine is the Siemens Gamesa group, and those four really go front to back when it comes to energy.

 

Taylor Kuykendall:

Excellent. And speaking of Siemens Energy has been reporting some great growth after a turnaround from some issues with the onshore wind turbines. Can you just walk us through what had happened there, and what you did to solve the issues that you were seeing?

 

Rich Voorberg:

Well, wind is a difficult market. If you look at all the OEMs suppliers, we all struggled over the years and some of that was due to price compression, and then terms and conditions that were hard. We ramped up factories and we built it and they didn't come. And then we ended up with overcapacity in the market, and we started pushing down prices and getting rid of terms and conditions. And suddenly things like COVID happened, and price escalation happened, or cost escalation happened. We went back-to-back in that. And all of us started losing significant money. As well we did a push on technology, so we were getting to bigger and bigger wind turbines, and that pushed the technology so far that we started having technical problems.

When we split off at Siemens about over four years ago, we own two-thirds of Siemens Gamesa, now we own 100% of it, and now we can fix it as Siemens Energy. So we're excited about what we are doing. We're getting a more predictable, where target is by 2026 that Siemens Gamesa portion will break even and then we'll start to get back into a profitable business from there. Guys are doing a great job of determining what the technical fixes are, implementing those in the field as well as working through some of those old contracts that were very difficult for us.

 

Taylor Kuykendall:

Excellent. It sounds like lots of reasons to be optimistic but I'm also wondering about some headwinds. We see the Trump administration changing a lot of the things, especially the way people think about renewable energy, but also tariffs. I'm just wondering what does this change in administration mean for the business here in North America?

 

Rich Voorberg:

Well first of all if you look across our whole spectrum, again, we are wide based. So the Trump administration is really a boon for our entire business.

One difficulty may be the wind side, offshore wind. Probably not new projects within North America or within the U.S. Globally, wind is still doing quite well and they're very busy globally on offshore. In the United States, the Northeast, we will see a little bit of a slowdown in there, but we've got plenty of contracts left to execute. So we'll run through that and then see where it goes from there.

When it comes to onshore, I'm still hearing from a lot of my customers. This sits on private land. There may be some things that the administration does that's able to slow them down, but a lot of my customers are still moving forward on a lot of the projects. So we still think that there's a lot of legs left in North America when it comes to wind turbines.

 

Taylor Kuykendall:

Any concerns specifically about tariffs and what that might do to cost?

 

Rich Voorberg:

Tariffs? I think we're all in the same boat, is how that looks. Are tariffs real? Are they not real? Is the threat of tariffs better than the actual implementation of the tariffs? I think what you're seeing is the tariffs on China are real, and probably going to be there for a while. But at the same time, even since COVID, we've been diversifying away from China. We still have some components coming out of China, but looking at dual sourcing, make sure that we're balanced. I think that's probably the best way. As well as we've got 13,000 people here in North America, 11 500 sitting here in the United States. So we build an awful lot of stuff here in the United States as opposed to importing. So it's a balance. We got to figure out how to manage it, but I think we as OEMs, we all sit in the same boat.

 

Taylor Kuykendall:

Excellent. And so what about the Inflation Reduction Act specifically? I know a lot of people say that we don't have to worry about it because there's enough of these things happening in Republican districts that they would never repeal it. What's your view? Are you worried about what might happen with Inflation Reduction Act and how that might impact your business?

 

Rich Voorberg:

Yeah, so you look at hydrogen that was a big capability with the IRA. The previous administration put a lot of roadblocks in the way that slowed that industry down quite a bit. So do we see it coming back under this administration when it comes to hydrogen? Probably not so much. When it comes to the wind turbine side, I was told earlier today that there was another letter from congressmen, I think, to Mike Johnson saying, "Don't be touching the IRA." So I think we're still seeing a lot of support on that. It's such a fine line of majority in there that they need all the congressmen to play.

I think what I'm hearing from the administration, as long as there's a business case, so we incentivize to get to the point where they can become a self-sufficient business. I think then we're going to see some of the IRA incentives continue. So we're optimistic. We don't think long-term incentives are good for anybody. You're creating a false economy. We don't want to become addicted to incentives. So what we're looking for is incentives to kickstart an industry, to get it localized, to get it making sense. And then we would like to see incentives disappear so that businesses can run as a proper business.

 

Taylor Kuykendall:

Excellent. I think we have to ask every executive we ever talked to about artificial intelligence and data centers now. I'm wondering what's your view? Obviously this is going to be a lot of demand, and then we had this DeepSeek announcement a while back about the efficiencies of that maybe bringing back expectations, or at least scaring people into thinking. What's your view of that? Short-term, long-term, what's AI going to do for the power sector, and how does that maybe trickle out to businesses like yours?

 

Rich Voorberg:

So AI as we look at it today, so it will start with short-term. I've been in this business for 35 years. We have never seen as many gas turbines sold in the United States as we have in this last five months. We've five months into our fiscal year, and we've been absolutely booming. I lived through the late '90 boom and it was really good. This one's got signs of being even bigger. It is a bit scary when you ramp up that fast because I remember the late '90s, we ramped up really fast and we dropped like a cliff. I think this one's got a lot more longevity to it. I think AI is something that's not going away.

You saw DeepSeek come in, freaked out the markets for a short period of time. Things bounced back again. I think things were hype and drive. We were accelerating pretty darn fast. I think they brought a dose of realism into the market as well, which isn't necessarily a bad thing. So what we believe is there's going to be advancements, there's going to be more efficient chips created. But at the same time, we're going to see much more data computing needed, and that's only going to drive more and more power. So we're still very bullish on data centers, and we think that that's going to drive a lot of our future.

 

Taylor Kuykendall:

And while we're on hot topics in the energy space, small modular reactors. Can you tell me a little bit about Siemens role in that, and what do you think maybe the timescale for that type of deployment is?

 

Rich Voorberg:

Yeah, so small modular reactors are a thing that's coming. I think the first time we'll see a good operating plan I think the target is within this decade. The pessimist in me says probably miss out by a year or two. So early 2030s. They're definitely coming. And where we as Siemens Energy sit, we're on the secondary side. So you've got the primary side, that's the radioactive side, and that creates the steam for the secondary side. And that's where we want to play. That's where our specialty is, supplying steam turbines. The reactors are going to make steam. The steam runs through our steam turbines and generators to produce electricity. That's where we're going to live is on that secondary side.

We're partnered with a number of different players and it's a great exciting thing. Is it the solution? No, it's not the solution. We believe everything needs to be under the umbrella. So we believe SMRs, renewables, hydroelectric, geothermal, and gas, and we're not going anywhere without gas in the near term anyways. So I think all these things need to come up, and we're not pick winners or losers. We're going to be across supporting this entire market.

 

Taylor Kuykendall:

It really is very interesting how widespread you guys stretch across the energy space. I'm wondering too then it seems like grid investment might be another one of those things where there's bipartisan support on all sides, but also a great need for that. Can you tell me a little about the opportunities in that space, and maybe what looks different in 2025 compared to the past few years?

 

Rich Voorberg:

Yeah. Right now it's been continuing to grow significantly for the last, I don't know, three, four years. Ramping up like we've never seen it before. Where gas turbines could be a little bit volatile, I think this is going to be very long-term. Because there's the data centers driving that, but there's the renewables coming in which drives a lot of that. And then frankly, the grid itself is just getting old, and a lot of it is 30, 40, 50, 70 years old. You need to replace it, and we need to replace it sooner rather than later. So not only are the data centers going to drive transmission, we're also going to see just the age of the grid driving it.

So we're super excited about the transmission side. What we're doing about it is we've got a facility in Jackson, Mississippi, does breakers, switch gear, et cetera. We've doubled the capacity out of that in the last couple of years. We're working on doubling the capacity again from there. Last year we made an announcement in Charlotte, we're going to build large power transformers out of Charlotte. And we're moving down that road, and we're super excited. We've got a million square feet already in Charlotte doing all our gas turbine, steam turbine service work, and generate our new unit. And now we're going to have a transformer factory there as well. So bringing jobs, bringing investment to the U.S., which we're super excited around.

 

Taylor Kuykendall:

Yeah, obviously lots of reasons for excitement, lots of reasons for optimism. But I wanted to tap into the pessimist you mentioned earlier again and just say, is there anything that keeps you up at night about 2025? Or anything that you worry about in the energy transition space, or the energy sector more broadly?

 

Rich Voorberg:

Just overheating. One of the biggest problems that I've had is having to disappoint customers. Customers I've known for my whole career when they say, "Oh, we need a gas turbine at a certain point, or we need a transformer at a certain point." And it's like, "Sorry, we're sold out. We can't support you with the delivery time that you need. We can do something out here, but I know you need it here. There's nothing we can do." That's the hardest part when you've been partnered with these customers for so many years, and we don't throw that word partner around lightly. We really believe in partnership. So we help each other out and we do our best to try to help them out. But when a customer is running short of power and needs a gas turbine delivery in 18 months, there's just nothing I can do with that. That keeps me awake because to disappoint people, because we made a career on supporting our customers.

 

Taylor Kuykendall:

And just to get back on a happier note, let's go back to the optimist. I'm wondering what are you most excited about for Siemens Energy in 2025? And if you don't want to pick a favorite, maybe just pick two or three favorites.

 

Rich Voorberg:

Boy, there's so much to be excited about right now. When I look at gas turbines, being able to sell and execute on so many gas turbines in such a short period of time is for a market that was in 2022, '23 was almost minuscule in North America. And now it's absolutely booming. That's probably the single most exciting. As a gas turbine guy for my whole career, that's the most exciting to go, "We're back in business again."

And then the other side is just energy is cool again, or maybe cool for the first time. As an engineer, I've always been excited over energy, but the world didn't share my excitement. I think now everybody is excited about energy, and I think they see it for what it is. Affordable, reliable, sustainable power. It drives a country and a country is driven there because it becomes more competitive when you've got economical power that's reliable. I think that's going to be our differentiator here in the United States, is we're going to continue to be able to do that, and be able to support great manufacturing jobs and employ the people, and raise the standard of living. So yeah, the exciting part is we're the foundation of driving the standard of living.

 

Taylor Kuykendall:

It's great to hear as a podcast host for an energy transition show. I'm glad to hear energy's cool again. I've got a lot of, I told you so's I got to deliver now to a few people. Thank you so much for joining us today. Appreciate the insights.

 

Rich Voorberg:

Great, thank you very much. I appreciate it.

 

Taylor Kuykendall:

All right listeners, thank you so much for listening to the latest episode of Energy Evolution. I want to give a special shout out to our incredible podcast team members. I am once again, Taylor Kuykendall. But other people behind this podcast include Dan Testa, Camilla Naschert, Christopher Coats, Karen Willenbrecht, and our wonderful agency partner, the One Nine Nine. To stay up to date with our upcoming episodes, be sure to subscribe to Energy Evolution on your favorite platform.

If you have any ideas for future themes or guests, we'd love to hear from you. All you have to do is shoot us an email at energyevolution@spglobal.com. And look, if you liked what you heard today, do consider sharing the podcast with others or leaving a review on your preferred podcast platform. We can't wait to bring you more fascinating discussions in the future. Until next time, take care and stay tuned for more from Energy Evolution.