Friday, June 4, 2010

ABB Automation & Power World Brings Record Attendance

In the second year since merging the company's automation- and power- related user group meetings, ABB Automation and Power World managed to draw a record crowd of over 4,000 people – a 30 percent increase over last year's numbers. This is a clear indicator that the manufacturing economy and automation marketplace are back on track. Automation and Power World is perhaps the only user group meeting that brings the process and discrete automation domains (including robotics) together with power products spanning from switchgear to high voltage transmission and distribution equipment. This is fortuitous for ABB, since the worlds of automation and electrification are becoming increasingly entwined due to the substantial potential for energy savings, increased reliability and uptime, and reduced maintenance costs.

ARC also attended Automation and Power World in record numbers, as several ARC analysts and ARC President, Andy Chatha, gave presentations and moderated several sessions. Topics covered included a chat with ABB executives, integration of automation and electrification, smart grid, asset management, and control system migration.

A Record Turnout and Positive Momentum

As ABB CEO, Joe Hogan, stated in the keynote session, "Size can be a killer at times. The bigger you get, the further away you can get from your customers." This certainly was not the case at Automation and Power World. Even with record attendance, there was a lot of face-to-face customer contact and ABB personnel, from executive management to regional salespeople, were highly approachable and willing to talk and answer questions. There are not too many user group meetings where the company CEO presides over the proceedings, but automation and power are at the core of ABB's overall business and the company's obvious strategic commitment to these markets showed at the conference.

Hogan also commented on the overall positive momentum in the global economy and acknowledged that ABB was in a recovery mode. This is largely because the developing economies in China, India, and other parts of the world recovered most quickly from the recession and represent a huge part of ABB's overall business. Hogan has pointed out several times in the past couple of years that economic growth closely parallels population. (For example, China had the world's largest economy in the seventeenth century). The G-20 are expected to surpass the G-7 in terms of GDP by 2013. The US economy is back in positive territory with 3 percent GDP growth, but this may slow a bit when the effects of the stimulus are removed. Commodity prices have also bounced back, with copper at almost pre-recession levels, and world energy demand continues to grow at the rate of almost 30 percent through 2030. Carbon dioxide emissions, however, are also growing concurrently. Three-quarters of all emissions reductions in this period will come from energy efficiency measures and use of renewables.

Well Positioned for the Energy Efficiency Revolution

Industry, one of the largest consumers of energy, is ripe for innovation when it comes to energy efficiency. Sixty-three percent of electrical energy is used to run motors in industrial applications. ARC believes that Industrial energy consumption can be cut by almost 10 percent. ABB's strong position in both drives and in many of the world's most energy-intensive process industries, place it in a good position to take advantage of the energy efficiency revolution. The company's recent acquisition of Ventyx for over $1 billion (over four times revenues), enables ABB to provide a suite of software that, according to President & CEO of ABB Inc. USA, Enrique Santacana, "Provides the glue that allows ABB to track the flow of electrons from the point of generation to the point of use."

Reorganization Capitalizes on Strengths

Hogan also pointed out that ABB designed its recent reorganization to align the company more closely with its customers' business. ABB regrouped the Automation Products and Robotics divisions into two new divisions – Discrete Automation and Motion and Low Voltage Products. The Process Automation division remained unchanged except for the addition of the instrumentation business from the Automation Products division. The company has also made some other major organizational changes and acquisitions that have greatly expanded its capabilities. Re-cent acquisitions include the Jokab machine safety business and Sinai Engineering in Canada (a systems integrator).

ABB moved its process automation business headquarters to Houston, where it is building a large demo center. The company expanded its industrial park in Mexico, and located its Corporate R&D and Smart Grid Center in Raleigh, North Carolina. ABB also recently made an offer to increase its stake in its Indian subsidiary to 75 percent.

Peter Terweisch Shares Key Development Activities

In a special session for the media, Chief Technology Officer, Peter Terweisch, shared some recent and impending technology developments, many related to energy and the electrical side of the business. The world needs more power with lower emissions, and the share of electricity in the energy mix is increasing. ABB is applying this basic premise to its business strategy. ABB entered the solar inverter market, for example, based on its strength in drives technology.

Energy storage is often an issue with renewable energy resources such as wind power. ABB developed SVC (Static Var Compensator) Light Energy Storage capabilities to address this issue. Terweisch also announced that ABB would be building a new HVDC light cable factory in the US.

ABB excels in integrating automation and electrical assets through the IEC 61850 protocol. The company now has over 20 projects under way for integrated power and automation, and the approach continues to gain traction. In the process automation systems space, the 5.1 release of the 800xA system, happening soon, will (among other things) feature node virtualization.

WirelessHART Adapter and New Wireless Sensor Technology

ABB has launched a considerable wireless initiative, beginning with an alliance with Pepperl+Fuchs to offer a wireless gateway. The company showed its new loop-powered WirelessHART adapter that should be commercially available in the third quarter. Providing a reliable power source for wireless devices has been a persistent problem, even with increased battery life. ABB introduced a prototype autonomous temperature transmitter that utilizes new temperature differential-based technology for power. This only needs a 30-degree C. temperature difference, easily attainable using the low ambient air temperatures and high process temperatures in a typical plant.

Town Hall Meeting and Chat with Executives

The Town Hall Meeting was one of several meetings with ABB executives the company hosted during the week. ARC also hosted a Chat with ABB Executives, moderated by ARC President, Andy Chatha, as part of the "ARC Inside" forum within Automation and Power World. These sessions featured several members of the ABB executive committee. According to Gary Steele, Executive Committee member responsible for human resources, ABB was one of the first companies to feel the recession and it is one of the first coming out of it, particularly in businesses such as Discrete Automation and Motion. Now, the company has to balance the dilemma of cost and growth.

Veli-Matti Reinikkala, Head of Process Automation Division, commented on the affects various stimulus packages have had on regional economies. In China, for example, the stimulus package is winding down, but in ABB's view, many of the projects spurred by the stimulus were already on the table, but reallocated due to the stimulus. So, in China at least, the removal of the stimulus should not result in a slowdown of growth for the automation marketplace. As evidence, Reinikkala pointed to the growth in China's automotive sector. Sinopec, the Chinese petroleum company, plans to build 30,000 fast charging stations for electric vehicles, an opportunity for which ABB is well positioned to take advantage.

At the ABB Chat with the Executives, Andy Chatha asked each panel member to provide examples of how ABB provides superior value to its customers. Rick Hepperla, Region Division Manager for Discrete Automation and Motion in North America, pointed out ABB's structural changes and cost reductions, as well as the huge energy efficiency opportunities for customers. The recession hit process automation customers hard and Reinikkala pointed out that ABB has focused on services to help customers get more out of their plants, facilities, and assets without the need for large capital outlays.

Of Oil Spills and Volcanic Ash

No one was surprised to hear a question directed at the executives regarding the Gulf of Mexico oil spill and what ABB can do to help in this crisis. While ABB does not specialize in oil spill mitigation or in selling blowout preventers, the executives acknowledged that the company would play a much larger role in process safety and overall safety culture in the years to come. ABB is already a major player in process safety and the company has considerable capabilities in remote operations management and remote monitoring. Minimizing the number of people required to man offshore oil rigs and reducing the space needed for things like power supplies and control systems are two areas where ABB will make significant contributions in the future.

Volcanic ash, while not as immediate a concern as the oil spill, caused a major disruption in the ABB supply chain recently with the shutdown of air traffic in Europe. ABB executives recognized that the company must further globalize its supply chain and distribution footprint, balancing issues of cost and risk.

A more agile supply chain is just part of ABB's efforts to become a more customer-friendly business. Part of this effort is the development of a new "Net Promoter Score" metric, where customers are asked if they are ABB promoters or detractors within their organizations. Determining who the promoters and detractors are (and why), provides a good basis for improving ABB's business. The company also reorganized its global account management and strategic accounts process and transitioned from 19 different ERP systems to a single system. This helped flatten the company's business unit infrastructure.

There were far too many tracks and presentations at Automation and Power World to mention here, but the overall content and quality of presentations was very high. ARC also hosted several sessions as part of the ARC Inside Forum at the event, covering topics such as energy management, control system migration, benchmarking, and integrated control and electrification. Automation and Power World continues to be the largest end user group meeting in the world of process automation, and the only one that integrates the worlds of power and automation into a single format.

How the Gulf Oil Spill Affects Process Automation, Safety, and Asset Management

ARC is not in a position to pass judgment on or assign blame for the tragic loss of life and environmental disaster unfolding in the Gulf of Mexico. From our perspective, the primary questions that need to be answered now are, "What can we learn from this mishap?" and "How can the industry prevent a reoccurrence of this type of event?" We believe that the answers to both questions involve improved process safety procedures and the intelligent application of automation, asset management, and improved testing, operations and maintenance practices. The regulatory backlash already begun in the wake of this disaster will bring these and other issues to the forefront in the coming months.

The Regulatory Environment Has Already Changed

The regulatory environment has already changed in the wake of the oil spill. President Obama suspended deepwater oil drilling permits for at least the next six months and has ordered a halt to drilling off the Alaska coast. Leases issued to companies exploring for oil in the Gulf of Mexico and the coast of Virginia have been halted. The Minerals Management Service is already being overhauled, and the director, Liz Birnbaum, forced to resign after less than a year on the job. US Secretary of the Interior, Ken Salazar, has already stated that wells not covered under the moratorium, "…will require certification of all blowout preventers, stronger procedures for keeping wells under control, a tougher inspection process, and expanded safety and training requirements for rig workers."

Offshore Exploration and Production Will Not Cease

The reality is that, our society is still highly dependent on hydrocarbons. As much as some would like to break this "oil habit," there seems to be no ready alternative. Hence, for the immediate future at least, we must continue exploring for and producing oil in increasingly remote and challenging environments to meet the world's huge appetite for energy.

Increased Adoption of Process Safety

Unfortunately, the Deepwater Horizon disaster is just one of many incidents in recent years in process plants and other industrial facilities that have cost many lives and have left environmental damage in their wake. Many of these incidents might have been prevented by appropriate application of a modern process safety system incorporating both safety instrumented system (SIS) technology and intelligent devices with remote diagnostics capabilities. The technology exists today to provide advanced, online diagnostics for everything from control valves to pressure transmitters, machinery, and even blowout preventers.

Market growth for process safety systems already exceeds growth in basic process control systems (BPCSs). On top of the many other highly publicized incidents in the process industries, the Deepwater Horizon incident could result in even more broad, sweeping regulatory pressures that could affect all process industries, not just offshore oil & gas.

The Role of Procedural Automation

Major plant incidents are usually the result of a confluence of factors, all converging at the same time to create an environment outside of the normal pre-operations testing environment. Most recent incidents in the process industries have some sort of procedural element associated with them. Either proper procedures were not followed, or no standard operating procedure was defined for the operator or maintenance person to follow. Many procedures in the process industries tend to be manual or guided procedures. While there is a place for these, the process industries can benefit greatly from a drive to automate many critical procedures, such as startup and shutdown.

The need for a procedural automation standard increases as the workforce continues to lose the highly experienced personnel who under-stand these procedures and there is no meaningful way to capture that knowledge to guide future operator/maintenance actions properly to prevent incidents. With strong support from the process automation end user community, the ISA 106 standards committee was recently formed to address this issue.

Improved Maintenance Practices

Just as there are procedural elements to most process incidents, poor maintenance practices also typically play a part. Increasingly, better adherence to maintenance practices and higher standards for maintenance will be required. Plant asset management (PAM) systems, combined with intelligent field devices, can help facilitate a proactive maintenance strategy and can even reduce maintenance costs, while helping to improve safety by identifying problems before they become unmanageable or by avoiding unnecessary trips to the field. Maintenance work practices, however, must be modified to take maximum advantage of all that PAM has to offer and this change can be challenging to institute.

Safety Culture

None of these measures are sufficient, however, without implementing a good safety culture. Regulations can be imposed and technologies adopted, but without a high regard for safety in all facets of day-to-day operations and the mindset to make intelligent decisions, bad decisions will still be made, corners will still be cut, and accidents will continue to happen. As we've stated many times, a good safety culture must be disseminated from the highest levels of executive management on down. It requires constant vigilance and a certain set of corporate values that must be continuously monitored and maintained.