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Siemens Energy plans U.S. power grids push to tap into
IRA boost
May 30,
2023
By Christoph Steitz
![](images/images_06_07_2023/pic2.jpg)
Christian Bruch, Chief Executive Officer of
Siemens Energy AG attends Siemens Energy's initial public offering
(IPO) at the Frankfurt Stock Exchange in Frankfurt, Germany, September
28, 2020. REUTERS/Ralph Orlowski
HAMBURG, May 26 (Reuters) - Siemens Energy (ENR1n.DE) is
considering setting up production in the United States to help
modernise the country's power grid, keen for a slice of what is
expected to be a multitrillion-dollar market following the Inflation
Reduction Act (IRA).
The deliberations are part of a broader rethink at the German power
conglomerate to expand its foothold in the United States, where it
makes 15% of sales, as favourable regulation is providing a boost to
renewables and hydrogen capacity that requires state-of-the-art energy
networks.
It also comes at a time when the United States and Europe are
drawing up competing plans to make it more lucrative for industry,
ranging from utilities to steelmakers, to expand businesses despite
soaring energy and raw materials costs.
"What drives the U.S. market is the long-term predictability of
subsidy conditions under the IRA. Any investor can fairly quickly do
the maths on the back of an envelope to figure out the benefits,"
Chief Executive Christian Bruch said.
"This is much simpler and clearer than in Europe," he told reporters
following a town-hall with staff in Hamburg.
While Bruch tried to assuage fears that a bigger presence in the
United States would not come at the expense of investments in Europe,
he said that the company would have to think carefully where to
allocate its resources going forward.
U.S. power grids are not directly benefiting from the IRA but will
require around $2 trillion in investments by 2050 to make sure that
energy sources eligible for support, including renewables and
hydrogen, can be integrated.
"This means that one has to invest in manufacturing capacity," Bruch
said.
So far, Siemens Energy has catered for the U.S. power grid market out
of Europe and Latin America, Bruch's fellow board member Tim Holt, who
is in charge of Siemens Energy's U.S. business, said.
SUBSIDY RACE
But the group is now assessing whether to set up production of network
equipment such as transformers, a key component of energy grids,
locally, Holt said.
Depending on whether these would be greenfield sites or building on
the group's existing 26 locations that include hubs in Florida, North
Carolina and Texas, a factory could cost a triple-digit million euro
sum.
"Customers would be willing to enter into firm off-take agreements
even now if we were to build plants in the United States," Holt said.
The comments follow recent plans to restart two idled onshore wind
turbine component plants and build two new offshore wind turbine
production sites in the United States, provided the group is
successful in local government tenders.
Building local offshore wind turbine factories was costing
"substantially less" under the IRA than in Europe, Bruch said, also
noting the legislation's positive impact on the hydrogen value chain,
a field where Siemens Energy is active, too.
The group is currently ramping up electrolyser capacity at its Berlin
plant in a joint venture with France's Air Liquide (AIRP.PA),
with Bruch saying U.S. customers had already made capacity bookings.
The Hydrogen Production Tax Credit, a key component of the IRA,
provides a 10-year federal tax credit of up to $3 per kilogram for
clean hydrogen produced after 2022 from facilities that begin
construction prior to 2033.
Bruch said the hydrogen credit was similar to a $160 subsidy on each
barrel of oil, adding that while the U.S. market would be served from
Berlin for the time being, the assembly of stacks could take place
locally if the group wins big projects.
"The U.S. is now driving commercial projects in hydrogen that really
fly for the first time."
($1 = 0.9084 euros)
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