Welcome to zero I am Akshatrati this week. Edison's twenty first century legacy. The General Electric Company was officially founded in eighteen ninety two, 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 twelve companies listed on the Dow Jones Industrial Average in eighteen ninety six, and as recently as twenty fifteen, GE was number twenty four
on the Fortune five hundred 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 Straisik. G 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 list earlier this year, g Ivanova'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 g 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 g Ivanova, and part of that privilege is because of the history. At the end of the day, twenty five percent of the world's electricity comes from our equipment and partnership with our customers every day, and there's a lot of pride inside Gevanova for what that means, especially as we go into this 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 Grain Innovation. 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 one hundred 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 gie Vnova 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, Seemen's Energy Mitsubushi heavy industries. Some of the boosts can be tied to the federes of 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 supercycle here, and when you really think about previous investment supercycles in the world, at least during my lifetime, you think about globalization in the eighties and nineties and the impact that had on economies.
You think about the Internet and software in the twenty and twenty tens, and we look at where we are with Gevanova and our position in the electric power system, and we're in the early stages of that next investment supercycle 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 Gevanova and outside 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 is just shut down its last coal power plant. It's brought to end a technology that ran for one hundred and forty 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. G 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 prior to Number one is to grow renewables as fast as the world can afford. That's new win, 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 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 often 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 twenty four 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 in 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 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 renewable 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 four hour duration up to maybe eight hour duration where economics can make real sense. A lot of the gas role is not for daily peaking. It's really seasonal. It's where in the summer and 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 ninety 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 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 US. An example is Arizona. I mean, this is a state in the US 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 twelve months of the year to a larger extent than many markets can. Places in comparison in the US, 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.
Before your current role, you were CEO of ge Power, which consisted of all of g 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 win segment and our electrification segment, when 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 EBIDAH 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 g I Vnova portfolio. Wind is a business that will have a better financial year in twenty twenty four than in twenty twenty three, but will not be profitable yet. The wind industry has been a challenging industry, no question about it. We're further along
today an onchore wind. Our onshore wind business is set up to deliver high single DIGITI BADAT margins this year, while offshore wind remains a loss making 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 on sure 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 on our existing backlog. And we say win playing an important role in both g i Vanova 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 sixty five percent 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 bumps 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 nine hundred 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 win.
After the break, I ask Scott how Gevnova 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. On Spotify. It helps other listeners find the show. The other issue you've faced, especially over this summer, has been the news about g Vernova's blades being broken in a few places. So there was a blade that broke in Nantucket and at 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, and we've also learned a lot about 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 will come out of this as a better win 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 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 frum.
But the technology is not in question.
We have a high degree of confidence in our holiad X 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 US in 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 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 Gevnova 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 eighteen to twenty four months, we've seen a shortage of transformers in the US, in Europe, actually globally, but US and Europe
particularly have been affected. Ge Bnova 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 electro power system, there hasn't been authentic growth in at least fifteen years. That includes with transformers, the reality is weren't out sing a steep uptick 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
paths 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 gi Venovo wooks on is corbon 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 on gas facilities. But the one that you are working on is tied to power plants. The only two pop plants in the world, both coal pop plants, that have corbon capture technology attached
to them. Working at a scale. But given your focus as gas and the world is building more gas, the technology said that you have to develop and ready is gas cobbon capture. What specifically is needed to get gas poplins 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 flu 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 BPT side in 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 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 important part of the equation.
So when should we expect a gas poplint with a g Vernova carbon capture unit to be.
Ready next decade?
Nine?
Oh, I think it'll be sooner than twenty thirty nine. 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. Now, nuclear as a technology has gone through quite a journey, what an explosive and useful technology. Growth during the seventies after the oil crisis, and then a steady decline in
the West in the nineties and the two thousands. 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 fraction of the size, so if a large power plant is one Gigaward. Small modular nuclear reactors are to fifty three hundred megawart. The only place there exists one that can
be powering the grade is China. So what is Jivan overdoing that will stop the growth of China and yet another decarbonization technology.
We're incredibly excited about our small modular reactor. These are three hundred mega op 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 twenty twenty nine
in Canada with Ontario Power Generation. We will be in construction on that first three hundred mega op block of power in twenty twenty five 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 a nuclear dynamic and in Scandinavia in which all of these markets are going to matter for nuclear. Now, this sentiment shift with
nuclear in the West is real, you know. You just think about the cop in Dubai and heads a stake. Committing to tripling the nuclear capacity in the world between now and twenty fifty is a step change with what's needed. That's going to include baseload, large gigawat size new nuclear capacity. It's going to include a lot of small modular technology like our three hundred megawap block of power. It's going to play an important role.
The world has about two terror awards of gas poplines installed. About half of those are in some form or the other linked to ge Yes. But with ge Vnova, 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 one hundred percent of our gas turbine fleet can be hydrogen combustion capable at one hundred percent by the end of this decade by twenty thirty. 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 US 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 hyper scale are 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 in 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 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 fifteen eighty 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 nineteenth early twentieth century because fossil fuels are easier to move their 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 nineteenth and early twentieth 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 in an 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 in the solar the electrons aren't just going to the home, but are come 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 gi Vanova, candidly, it's a big reason why we chose Cambridge, mass as our corporate headquarter 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, oh, 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 twelve year old son. My twelve year old son loves electric vehicles. My twelve year old son, here's me spend a lot of time talking about the fact that that just transfers the problem or the opportunity the electric power system that needs to decarbonize for there to be any net benefit. But it isn't just about
the twelve 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, where 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 supercycle that we're going into in their 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 zero. And now for the sound of the week.
Mary had a little damage and everywhere that's very wet.
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 zero pord at Bloomberg dot Net. Zero's producer is Mighty Lee Rau. Bloomberg's head of podcast is Sage Bauman
and head of Talk is Brendan yunim Our. Theme music is composed by Wonderly Special thanks to Will Mathis Chauvan Wagner, Monique melema Ethan Steinberg, Blake Maples, and Jessica peck I am Ashatrati Back soon