What Thomas Edison’s legacy looks like in the 21st century
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The General Electric Company was officially founded in 1892, but its story starts much earlier with the inventor Thomas Edison. He didn't just invent things and sometimes take credit for others' inventions, but he also had a lot of business ideas. He made and sold lamps and light bulbs and fixtures and sockets and power plants and the grid. The list goes on.

He was able to do all of that because he had some hefty backers, including J.P. Morgan and the Vanderbilt family. Eventually, a bundle of his businesses and some others were consolidated into GE. And from there on, it was a behemoth. GE was one of the original 12 companies listed on the Dow Jones Industrial Average in 1896.

And as recently as 2015, GE was number 24 on the Fortune 500 list of global companies. Now, that's all changed.

A breakup that began last year has concluded, with GE splitting off into three separate companies, one focusing on healthcare, another on aerospace, and the third is GE Vernova, which carries Edison's biggest legacy. And my guest today is its CEO, Scott Strasick. GE Vernova is the biggest player in making turbines for gas power plants. It also makes plenty of wind turbines.

It's got its hands in building nuclear power and carbon capture. And some of its other business lines include solutions for the grid, such as software and batteries. Since its initial listing earlier this year, GE Vernova's share price has skyrocketed. But the company faces plenty of challenges, especially in the wind business.

I sat down with Scott when he was in London earlier this autumn. We talked about the end of coal, the growth of gas, and how far renewables can go. You get to run the most iconic part of GE as I would see it. Yes. The electricity business. Do you feel a weight of responsibility, a weight of history?

Yes, it's a real privilege to have the opportunity to lead GE Vernova. And part of that privilege is because of the history. At the end of the day, 25% of the world's electricity comes from our equipment in partnership with our customers every day.

And there's a lot of pride inside GE Vernova for what that means, especially as we go into the cycle today with real load growth at a time that we need to transform the electric power system and we need to simultaneously decarbonize it. So that's really at the heart of even our name, Vernova. Verde, green, Nova, new, new green innovation, right?

We didn't, when we decided to call this company GE Vernova, want to run away from GE, which represented the electrification of the world the last 100 years. But we also know the world is changing. And with that, we need to change. And that's where GE Vernova really comes from, from a branding perspective, to decarbonize the electric power system. And we've seen a rapid increase in the stock price of GE Vernova since it became a company of its own. And

That's been the case also for some of your peers in the electricity infrastructure business. Siemens Energy, Mitsubishi Heavy Industries, some of that boost can be tied to the Fed Reserve cutting interest rates, which would make it cheaper to borrow money for infrastructure. But the trend started earlier in the year. Why are investors so optimistic about your growth?

We talk a lot about the fact that we're in the early innings of an investment super cycle here. And when you really think about previous investment super cycles in the world, at least during my lifetime, you think about globalization in the 80s and 90s and the impact that had on economies. You think about the internet and software in the 2000s and 2010s.

And we look at where we are with GE Vernova and our position in the electric power system, and we're in the early stages of that next investment super cycle that's going to transform economies. And through that process, we see incredible opportunities for us to grow and serve those markets while simultaneously having an incredible impact on the world. So it's early for us as a new public company, but one in which both inside the walls of GE Vernova and outside, we're

There's a lot of optimism and a lot of ambition for what we can become. And we're excited about that. You're visiting here in London, where the UK has just shut down its last coal power plant. It's brought to end a technology that ran for 140 years and that the UK just doesn't find useful anymore.

and that's made big headlines around the world. What is less known is that gas generation, which is what was replacing coal alongside renewables, has also been falling in recent years quite dramatically. GE has a big gas business. But if you look at the UK as a country that's advanced in the energy transition,

And you see that gas generation is starting to fall. Why are you so optimistic about the growth of gas in the world? Well, I'd start by saying we in the company every day talk about priority number one is to grow renewables as fast as the world can afford. That's new wind. That's new solar and storage. But there can be limiting factors to that. And those limiting factors is really where gas plays a critical role as a force multiplier, right?

to enable even more wind and solar to be built. Because the reality is, as that renewables penetration rate gets higher and higher, it needs a complementing source of fuel that you can turn on and off and that you can control. So part of that gas growth is simply coming from the fact that it is the enabler to allow the electric power system to continue to add more intermittent zero carbon power sources like wind and solar.

that is leading to new capacity getting added to the world for new gas to enable new wind and solar. At the same time, there's a lot of demand cycles right now where baseload power is needed with high levels of reliability. When you think about the hyperscaler demand for new data centers, they need to work 24 hours a day, seven days a week with baseload power. That is driving new demand cycles for gas.

You also have parts of the world that don't have necessarily the same resources that the UK has, that need more power-dense solutions because they may not have the wind and solar conditions. There's a lot of places in Asia that are analogous to that, where new gas build right now is replacing coal, much like we've seen take place in both the UK and the US. That's a catalyst for growth for gas in the near term.

So the role of gas will evolve over time. There's no question about that. Nominally, we see gas continuing to grow through the next decade with the amount of electrons it provides to the system. But the proportion of gas in that system in totality will come down as these other zero carbon power sources grow at a faster rate than gas grows in the world.

What about storage eating into the gas business? Because batteries are getting cheaper and batteries can fill in the gaps when renewables aren't either hitting or when the demand is greater than what even renewables are able to provide. Does that not make you pessimistic about gas given battery prices will continue to fall?

Battery prices will. Storage is an important part of the system, but storage is an important part of the system for really daily peaking. Storage is a great solution for 4-hour duration, up to maybe 8-hour duration, where economics can make real sense. A lot of the gas roll is not for daily peaking. It's really seasonal.

It's where in the summer in parts of the world that high electric demand goes up for air conditioning, or in the winter where heating drives real demand, that it's not four-hour batteries or eight-hour batteries. It's 90 days of much higher load demand, which gas serves. And those aren't examples where lithium-ion batteries or really any other technology that's on the forefront in the near term for storage is

is going to displace gas. That seasonal peaking is exactly what gas is so well equipped to serve, has been serving, and will continue to serve for a very long time. In the U.S., an example is Arizona. I mean, this is a state in the U.S. that does have very good solar and wind conditions. So in a state like Arizona that can count on that fuel, that solar and that wind, that has a fairly narrow

bridge period that it needs to fulfill, storage is a great solution. They can count on consistent solar and wind for most of their 12 months of the year to a larger extent than many markets can. Places in comparison in the U.S., like the Northeast, for their winter peak, or in the Southeast, doesn't have the same high-quality wind and solar conditions when they really need peak conditions.

Those are cases where gas is still going to run and is going to run a lot. Now, before your current role, you were CEO of GE Power, which consisted of all of GE Vernova minus the renewables business and the electricity infrastructure business. You've been running Vernova for three years, even though the company itself was spun off earlier this year. While the infrastructure business is working for you,

Why is the renewables business such a problem? Well, let's take it into pieces. The reality is we have three businesses now inside Vernova. You make reference to the power business and it really thriving today financially and driving real profitability.

What was once renewables has now been broken out into two business segments, our wind segment and our electrification segment. Wind, both onshore and offshore, electrification, both the physical expansion of the grid and grid software.

If we start with that electrification business, that's our fastest growing business today. That's a business that we've said is going to deliver high single-digit EBITDA margins this year with real growth potential and margin accretion potential in the future. So we're really bullish on electrification and that becoming a much larger piece of the GE Vernova portfolio.

Wind is a business that will have a better financial year in 2024 than in 2023, but will not be profitable yet. The wind industry has been a challenging industry, no question about it. We're further along today in onshore wind. Our onshore wind business is set up to deliver high single-digit EBITDA margins this year, while offshore wind remains a loss-making industry.

We've been open about the fact that we have an existing tough backlog that we're going to have to fulfill on for the next few years that is going to be in the red. But on the other side of that, we're going to have a thriving onshore wind business and hopefully a very different economic model for offshore wind with future orders that we take, materially different economics than the economics that we have in our existing backlog, and

And we see wind playing an important role in both GE Vernova and in the world. So you have to kind of look at the dynamics a little bit differently between the grid and wind and understand both on their own.

US and Europe for you are about 65% of the business right now. Those businesses have seen flat or very slow increase in electricity demand. That's now changing as you talked about with AI data centers, but also general electrification needs, whether that be electric cars or move to heat pumps here in the UK, for example. And that's been good for your business. That's what you're hoping will help you decarbonize faster.

except it's not been good for offshore wind. You've just got 900 jobs. When everything is growing, why is the offshore business so hard? Well, I think there's a reset happening right now. And that reset is with the end customer pricing, whether it be with states in the US or federal governments in Europe. And as that reset happens, that gives the industry a new chance to thrive. But

Offshore wind is also a very long cycle business. It isn't an industry that is orders today that fulfill tomorrow. These are five plus year cycle from order to commissioning of new wind farms out at sea. And this is going to take some time. So we believe offshore wind matters for the world.

It's going to play an important role in the energy transition, but we have to get the industry back to health. And that's really what we're focused on right now is executing on our existing backlog, serving our customers and the markets that we're committed to while we get better at offshore wind.

After the break, I asked Scott how GE Vernova is weathering the fallout from turbine accidents. By the way, if you've been enjoying this episode, please take a moment to rate and review the show on Apple Podcasts and Spotify. It helps other listeners find the show.

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Money Movement Services by Intuit Payments Inc. Licensed by NYDFS. The other issue you faced, especially over the summer, has been the news about G. Wernhover's blades being broken in a few places. So there was a blade that broke in Nantucket and it closed beaches. There was an issue with installing blades here in the UK.

The offshore business in general is struggling. In the US especially, there's politics that comes into picture with clean energy versus fossil fuels, and that feeds into these headlines. How are you feeling about what just happened over the summer with the blades and whether that will have real negative impacts on the offshore business even more than what the business has done based on economics?

We've had a tough summer. Without question, the last many months have been difficult for us with offshore wind, but we've also learned a lot about it. We've also learned a lot through that process. We've learned a lot on blade manufacturing, path forward. We've learned a lot on standard work at executing out at sea. And through this process, I have even more conviction that as a business, we're going to be able to do a lot of things.

will come out of this as a better wind company on the other side. Is the technology in question of manufacturing blades? Like what is the problem that led to the blades breaking apart and how does that affect perception of the business? Two distinct dynamics. There's a dynamic where there was a blade deviation from a manufacturing process in one of our facilities that's real and that caused our escape in the Atlantic.

In the North Sea, the issues do not have to do with manufacturability and are distinctly different related to our execution of putting together the commissioning of the blades out at sea. Both are things we've got to be better at. But I'm highly confident we can do both better. And we're taking the learnings from this summer, and we're going to make a better business from it. But the technology is not in question.

We have a high degree of confidence in our Hollyadex wind turbine and the technology we're using. We've got opportunities to get better today, and that's exactly what we're going to do.

Now, on this podcast, we talk a lot about what we can do to decarbonize and reduce emissions quickly. But it is a climate podcast, and we are living through an era where we are getting more and more extreme weather events. Big storm strikes that take down electricity infrastructure. It happened after Hurricane Helene. It happened after Hurricane Milton.

How are you thinking about those challenges for your business? Are there solutions you can come up with that make the grid more resilient? Or is that actually good for business because you get to sell more of your electricity infrastructure because, you know, these storms are going to come more and more? No, to be clear at the start, I mean, our true north is to...

both electrify and decarbonize the world, because as a company, we believe that the climate change challenge that we have is real, and it's very well illustrated with the extremes of these storms and the frequency with which they're happening. And our true north is to electrify and decarbonize the world that can allow us to change the arc of climate change and have an impact on the frequency of these storms taking place.

Now, while we're in this world today with the extremes of weather, there are things we can do. Certainly in our grid business, we can underground a lot of the infrastructure for the grid that today is above ground, as an example, that can make a much sturdier electric power system in the U.S. and abroad.

storm risky locations or in wildfire risky locations where we underground the entire electric power system. Those are examples of things that are enabling growth in our grid business today that ultimately leads to a sturdier electric power system and one that we're committed to serve in a very real way. But we want to change the arc of climate change here with what we're doing so these storms don't happen with the frequency that we're happening.

And we have conviction that inside GE Vernova, we can do exactly that. Beyond the supply chain issues that have come from either the pandemic or from storms, there have been other issues in the electricity infrastructure business that have more to do with the industry itself. So for the past 18 to 24 months, we've seen a shortage of transformers in the U.S., in Europe, actually globally, but U.S. and Europe particularly have been affected.

GE, Vinnova makes transformers. Why do you think this shortage existed in the first place and what are you doing to address it? Like many parts of the electropower system, there hasn't been authentic growth in at least 15 years. That includes with transformers. The reality is we're now seeing a steep uptick in

in demand, and with it we're investing. One good example is in the UK. We make heavy duty transformer and valve equipment in the UK and Stafford in the UK, and we're doubling our capacity in these facilities to serve this market. So these aren't historical factories, the most recent past that have been experiencing real growth.

They're going to be incredibly important factories for the world in the years that come, and we're investing substantial capital into them to serve that growing market. Another area that G.Vanova works on is carbon capture. Now, carbon capture is a set of technologies that can be applied to many different sources of carbon dioxide. They can come from industry or they can come from oil and gas facilities, but the one that you are working on is tied to

power plants. There are only two power plants in the world, both coal power plants that have carbon capture technology attached to them working at a scale. But given your focus is gas and the world is building more gas, the technology said that you have to develop and ready is gas carbon capture. What specifically is needed is

to get gas power plants to have carbon capture in an economic fashion? We're excited about the potential here, but it's going to take time. At the end of the day, gas does not have a very high carbon concentration out of the flue of carbon to capture, which makes it harder to catch that carbon in an economic way. We're working on technology that first, through the exhaust gas recirculation process, condenses the carbon that allows it easier to catch.

That's something that we will leverage in BP Teesside and a project here in the UK that we're getting ready to start to build through condensing the carbon through the thermodynamics that make it easier to catch.

We're also investing in new carbon capture technology. We believe solid sorbent technology, I think sponges with chemicals that as air flows through catches the carbon and puts it into the carbon pipelines is going to be a critical carbon capture technology for the future. And today we have a running direct air capture plant

capturing carbon out of the air at a really small carbon concentration level, that ultimately we see a pathway to apply to gas plants. But that's going to take time, because today we're running a prototype at our research center that we will industrialize over the second half of this decade and really commercialize into the next decade. But we think it's going to be an important part of the equation.

So when should we expect a gas power plant with a G-Virnova carbon capture unit to be ready? Next decade. 2039? Oh, I think it'll be sooner than 2039, but we're probably not at a point that we're ready to call a year at this point. But we're working hard to industrialize this decade, and it will be commercialized and running next decade. But we've got work to do.

Another technology that you're working on that has a more definite date for deployment is small modular nuclear reactors. Yes. Now, nuclear as a technology has gone through quite a journey. What an explosive and useful technology growth during the 70s, after the oil crisis, and then a steady decline in the West in the 90s and the 2000s.

But if you look at the growth for nuclear, it's mostly in Asia. It's mostly in China now. And even when it comes to small modular nuclear reactors, which are a fraction of the size, so if a large power plant is one gigawatt, small modular nuclear reactors are 250, 300 megawatt. The only place there exists one that can be powering the grid is China. So what is G-Vernova doing that will stop China

the growth of China in yet another decarbonization technology. We're incredibly excited about our small modular reactor. These are 300 megawatt blocks of power that use existing boiling water reactor technology. The combustion chamber is really the exact same technology that's been licensed in the world to use today and is running in the world today. But we've modularized and scaled the balance of plant around that combustion chamber.

In comparison to the question on carbon capture, where it's a next decade thing with small modular reactors, the first one will be running in 2029 in Canada with Ontario power generation. We will be in construction on that first 300 megawatt block of power in 2025.

and are incredibly excited about the pipeline of activity we have in four provinces in Canada, in the US with Tennessee Valley Authority, progress we're making both in Poland, in the UK with the nuclear dynamics, and in Scandinavia, in which all of these markets are going to matter for nuclear. Now, the sentiment shift with nuclear in the West is real. You know, you just think about the COP in Dubai,

And heads of state committing to tripling the nuclear capacity in the world between now and 2050 is a step change with what's needed. That's going to include baseload, large gigawatt-sized new nuclear capacity. It's going to include a lot of small modular technology like our 300-megawatt block of power. It's going to play an important role. The world has about two terawatts of gas power plants installed. About half of those are interoperable.

in some form or the other, linked to GE. Yes. But with GE Vernova, you've also made it very clear that the future of the company is a decarbonized GE. Yes. So with a huge gas power business and a growing gas power business, how exactly do you deliver on the decarbonization side? Do you have to retire your gas business?

Well, no. We say every day that a dollar invested in gas is not a dollar invested in carbon forever. And that's exactly why we had the conversation on carbon capture and why we're investing in carbon capture, because we're going to need to decarbonize those gas power plants. It's why we're investing in hydrogen combustion.

with our gas turbines. And we've made the commitment that 100% of our gas turbine fleet can be hydrogen combustion capable at 100% by the end of this decade, by 2030. Now, we need the green hydrogen fuel to show up at scale for that to become a reality, but our gas turbines are going to be ready.

So we're focused on investing into our gas business for that growth, but that investment includes investing into the decarbonization of gas. The other question that is pertinent in Europe and the U.S. is the use of artificial intelligence and the demand on electricity that is growing as a result.

For many in the climate space, that seems like a problem because you're getting demand increase for electricity in applications that don't yet seem to be productive or beneficial to society. And so it's seen as a cost, as a carbon cost that is increasing.

But you see it differently. You see the demand growth as a good thing for decarbonization. How exactly? No question. I mean, it gives me that much more optimism that we're going to move decarbonization technologies to the left because the reality is these hyperscaler customers for us that need more power to grow their business care deeply about their sustainability commitments.

And I can tell you with the amount of time that I'm spending with this customer archetype and the C-suite of these companies, this is real, their commitment to sustainability. I leave this last year really in which we've spent substantial time with these hyperscalers. Number one, believing the growth is real.

But number two, that over time, they will drive the carbon intensity of that power, powering data centers down. And as they do that, the rest of the world will draft off of that scaled investment they're making that allows us to industrialize decarbonized technologies faster than we would otherwise. So I hear the pessimism at times with rooms that I walk into that say,

This is a bad thing that we're going into a growth cycle. But I've never seen an industry that doesn't thrive advancing technologies at an easier pace when there's growth than when it's flat demand. And we're going into our first growth cycle, and we're going to take advantage of it. And part of taking advantage of it is industrializing these products at scale faster than we would have otherwise. As I've obsessed about the

story of electricity, which goes all the way back to 1580, from the study of magnetism done in a scientific way, which of course led to being able to create electricity using magnets in the first place. One thing that most people realize is electricity lost to fossil fuels in the late 19th, early 20th century because fossil fuels are easier to move, they're dense sources of energy.

But one that people missed is that electricity itself is a complicated source of energy. To be able to produce, move and consume electricity requires scientific understanding and technology development that just wasn't there in the late 19th and early 20th century. The story is completely different today. It's still not as easy to move.

as fossil fuels are, and yet technology developments have made it so much easier to manage electricity. What do you see happens over the next century, regardless of climate, regardless of carbon, to the story of electricity?

Well, I think the appreciation for one of the most complex machines the world has today that we don't talk about, which is the grid itself, is going to get much better understood and invested into, not just to simply expand it, but lead to a whole other level of sophistication on how we manage the electrons flow. To your point, that system has massive opportunity today and admittedly is built today and

in a underwriting case with coal, one directional electrons going from a base load power plant to the home. We now live in a world where, admittedly, the electricity is coming from more varied sources,

The fuel isn't always dependable, depending on the wind and the solar. The electrons aren't just going to the home, but are coming out of the home from solar panels and EV trucks. And that brains of the grid needs to uptick itself to best leverage an incredible machine that's under our feet every day.

Those investments are going to transform the electric power system. So we tend to spend a lot of time talking about the power generation sources. And that's real. Wind, gas, nuclear. But there will probably be three times more investment in making this incredible grid and machine work in a more optimal way that's going to allow the electric power system to further displace fossil fuels.

That is going to happen. That is going to be appreciated. The amount of capital, the amount of human talent that's going to go into that is incredibly exciting. And for us, as an example, when I was evaluating where we wanted to base GE Vernova, candidly, it's a big reason why we chose Cambridge Mass as our corporate headquarters, because

Because the reality is there's a huge software intellect in Cambridge with the schools. There's a system thinking at places like MIT that are critical for us to bring together to optimize this incredible resource we have.

in a way that the electric power system can continue to take over that role from fossil fuel. And we're going to see incredible invention in this regard that's incredibly exciting. The story of electricity is exciting because it's going to grow.

But the things that make people go cool are electric cars, are heat pumps. It's not really the grid. The grid is seen as this complex, big, boring machine that kind of sits in the background. People walk past transformers never knowing there's a transformer. People look at pylons going, we have to see those cables again. What do you do to make the story of the grid cool that people want to actually work on the grid challenge?

No question. It's an important one, because we have a lot of innovation ahead of us in the electric power system. I mean, for me, I kind of start at home. I have a 12-year-old son. My 12-year-old son loves electric vehicles. My 12-year-old son hears me spend a lot of time talking about the fact that that just transfers the problem or the opportunity of the electric power system that needs to decarbonize for there to be any net benefit.

But it isn't just about the 12-year-olds. Like my son, it comes back to really getting kids coming out of college today and coming into our industry. Because in so many cases, I talk with young people that say this is their generation's biggest challenge. Yet a few minutes into the conversation, when I then ask them where they're going with their careers, it has nothing to do with this.

And that's really why we chose Cambridge as our corporate headquarters, because Boston is a city that has more college students than almost any other. And I was either going to cry in my beer over that, or we were going to go to where the students were. Because this industry is going to transform economies. It's going to transform the world. But we need kids having that view that by adding to the electric power system, electrifying the world, and doing it in a decarbonized way,

This is their generation's biggest opportunity. And that's why we're in Cambridge. It's why we're right in the middle of the college campuses, because we need this next generation to understand this investment super cycle that we're going into and the role they can play. I think it's incredibly exciting. We're seeing real momentum there, and we need to make it real for them, for opportunities for them to play a leadership role with us transforming the world and transforming this industry. Thank you, Scott. Thank you.

Thank you for listening to Xero. And now for the sound of the week. That's the sound of one of the earliest audio recordings made by Thomas Edison on a phonograph. If you like this episode, please take a moment to rate or review the show on Apple Podcasts and Spotify. Share this episode with a friend or with someone who can change a light bulb all by themselves.

You can get in touch at zeropod at bloomberg.net. Zero's producer is Maithili Rao. Bloomberg's head of podcast is Sage Bhavan. And head of talk is Brendan Newnham. Our theme music is composed by Wonderly. Special thanks to Will Mathis, Shravan Wagner, Monique Malima, Ethan Steinberg, Blake Maples, and Jessica Peck. I am Akshat Rati. Back soon.