Hitachi Energy India Ltd., with a market cap exceeding Rs 54,000 crore, is a major player in the energy sector, offering critical equipment and services for the green transition. In a conversation with Aggam Walia, N Venu, MD & CEO, India and South Asia, Hitachi Energy, addressed key topics including the resilience of the supply chain for power transformers amid growing global demand, advancements in energy storage systems, and the unique challenges posed by offshore wind generation. Can you share some details on the supply chain for power transformers in terms of resilience and localisation? When it comes to the supply chain, I would say it is very robust. When we talk of the main things, like transformer bushings and insulation materials, those are all very available. Where we have a challenge is probably CRGO (cold rolled grain oriented) steel, which we use within the transformer. We don’t have the capacity built in the country for that from the steel manufacturers. But we have now seen announcements from some of the steel industry players to manufacture CRGO steel. Then, to some extent copper, depending upon the market. But otherwise, we have created a very robust supply chain in ensuring that we meet the demand requirements of this country and also from outside. Having said that, the energy transition demand has suddenly grown. Whether it is demand arising out of renewable generation capacity adding up or creating a robust transmission network, it has gone up. We need to have better planning in terms of ordering and visibility. The issue is not about not having enough supply but ensuring that we have better planning to see that both demand and supply matches with the requirement. In recent years, cost of transformers have gone up significantly–over 70-80 per cent by some estimates. Is that a result of demand-supply imbalance? Cost is basically a market-driven phenomenon. I don't call it supply-demand issues. In my view, there is enough balance between the supply and the demand. It's not that there is an over-supply or over-demand case. Having said that, there is enough demand and at the same time today customers are willing to accept from any geographical (source). India is very well positioned and if we are having a customer from Europe or the Middle East, they are willing to accept, which was not the case earlier. So from that standpoint, supply-demand is there but otherwise its cost is primarily market-driven, a bit of inflation challenges everywhere, and also the metal prices. (Cost for) most of a transformer, around 60 per cent of the commodities like oil, copper, and CRGO, are market-driven. How does Hitachi plan to balance the domestic and export markets given the rising global demand for transformers? Way back in 1949, we started in a small way and since then we have expanded both our manufacturing, our engineering, our talents, etc. We have 19 manufacturing factories here. Our main focus is to cater to the domestic demand. We have enough demand here and it has been growing. Over a period of time, we set ourselves a target to use this Indian manufacturing base to also cater to the rest of the world, wherever it is feasible. Based on that, we said that in the midterm we should reach 25 per cent of our total orders and revenue to be exports and we have met that target. Our aim is to sustain this momentum up to a particular per cent and focus on the domestic market. We believe that the domestic market has a lot of opportunities to offer in terms of renewable energy, interstate transmission network, and also the industrial penetration, which is going to come in a big way as industries decarbonize. Energy storage is coming in a big way. How do you look at these developments? With so much renewable energy coming in, to ensure that the system is stable and to have round the clock green energy, you need to have storage. There are a lot of options in storage–pump storage is one example but the challenge with pump storage is that it has a long gestation period because you need to do a lot of civil work. Battery energy storage is another alternative. Again, the pathway to storage is not one technology but multiple technologies. With battery storage, the cost of lithium-ion batteries is very high, so sometimes it doesn't make a return on investment, and that's the reason why the government has come out with a viability gap funding for the short-term basis. When it comes to Hitachi Energy, this is one of our growth-oriented segments. We do not manufacture batteries but we create energy storage systems using third-party batteries. This market is going to come up in India and we are looking at various scenarios to see how we play our part here. India is also looking to build offshore wind capacities. What are some of the key technological challenges with offshore wind? Globally, offshore wind is one of our core segments–we have connected around 38 GW of offshore wind using our technology. If offshore wind comes in near to the shore, then people use AC (alternating current) for economics and wherever it is in deep water, we use the DC (direct current) technology. We have our offerings which we call oceanic where we have innovative solutions designed for the offshore environment. It's a fully qualified portfolio of transformer and services for the offshore industry, for fixed-bottom, floating, and subsea applications. Of course, there are some technological needs, for example it has to be corrosion resistance, structural integrity and grid integration. In addition to that, we need to also have a lot of remote monitoring and maintenance because every time we cannot go offshore.
