Recently, German engineering giant Siemens announced that it will start local manufacture of solar inverters for the growing renewable energy market in India, as well as for exports. In an interaction with Mint,Ralf Christian, global head and CEO of energy management at Siemens AG and Harald Griem, executive vice-president and head of energy management, Siemens Ltd talk about Siemens’s growing focus on India as a manufacturing and export destination, and the emerging growth opportunities of renewable energy and electric mobility.
The Siemens energy management division is a global supplier of products, systems, solutions and services for power transmission and distribution, which includes systems for the low-voltage and distribution grids, smart grids, high-voltage transmission systems and energy storage systems. The division, present in 90 countries, has 52,000 employees and roughly 100 production sites worldwide.
From a mid-term perspective, how is your strategy for the Indian market shaping up, especially in terms of looking at India as a manufacturing destination? What are the key areas of focus for the Siemens energy management division here?
Christian: We are localizing more technologies. It is a market we believe where there are more export opportunities coming up, which is adding to the growth potential of Siemens India as well. So, the focus is not only serving the domestic market, but deploying these new products and technologies in the export market.
We expect a long-term growth market as most energy consumption turns electric. The best example is electric mobility in the next decade. So, that is driving a lot of new technology investments, for example digitalization. That is an area where we have to clearly add many more talents, many more people. Secondly, you have a more decentralized energy infrastructure. So, that is driving new products and new technologies.
Is localization, developing India as an export hub a big focus area?
Christian: Absolutely. It is not the only area around the globe, but the more important ones. The technology and quality of products that we are now starting to produce here is determined as well to serve export markets.
Griem: For example, the solar inverter that we will start manufacturing in India. Of course, we would want to cover the Indian market, but we are also eyeing the large solar markets around India, prominently Middle East and South-East Asia to be served from India. Right now, 25-30% of the production is for exports.
Christian: For solar inverters, I would say the export to domestic split will probably be 50-50 in the mid term. We start here locally for India and gradually, the export will kick in year by year.
From an export perspective, how big is the Indian business?
Christian: If we see from a global perspective, then today, probably the biggest hub for exporting is China and I would say, very quickly we see India in 2nd or 3rd place.
Beyond the solar inverters, are there any other technologies/products that you plan to soon start manufacturing here in India for the local market or from the export perspective?
Christian: We have already a significant setup, 22 factories in total. But there is more we can do and step-by-step, we will localize even more products.
You can be sure there are opportunities to do more in the years to come. We will expand our transformer production here in India. We will also get into the wind application for transformers, obviously because there is a large domestic demand as well.
What we see in most cases is that the product that will be localized in India, the market is not strong enough alone in India to make that commercially viable. So, we always need to make sure that we should have the capability to export. So, if you want technology to be localized, then this has to be done in a way that we find open markets for export as well.
On the transmission side, which is a big area for Siemens, do you see a big opportunity in the India’s renewable energy drive?
Griem: Renewable integration is clearly a huge topic. Just think about the 160 gigawatts (GW) of renewables that should be connected by 2022. Which is compared to a peak installation currently of roundabout 300GW, and half of that would come from completely fluctuating sources. So, the management of that fluctuating generation and the integration and balancing between what comes from the generation, and optimising the demand side, that is a huge task, which we can only organise with high-end digital control systems.
Given the focus on adding major renewable capacity and given the government is talking about making vehicles completely electric by 2030, do you see energy storage as a major opportunity for Siemens in India?
Christian: The technology is getting more affordable year by year. On the other side, we see a ramp-up of renewables, you have a higher need. India is probably today, in relative to the market size, not leading in storage, there are other regions where the deployment is already happening much faster. But I am convinced that if you go down the road 2 or 3 years there will be more economically feasible deployments on storage in different sizes, as well in India. So, I would not think it is a big short-term market, but in the mid-term, it is a sizeable market.