GE celebrated the largest services deal in its history on Monday, with a $3bn agreement designed to lead the digital industrial transformation of Sonelgaz’s power plants throughout Algeria.
The company will collaborate with Sonelgaz SPE, a subsidiary of Algeria state-owned Sonelgaz, in a contract that highlights its Fleet360 total plant solutions capabilities.
GE Power Services chief executive officer Paul McElhinney spoke to Power Engineering International about the possibilities unleashed by this high profile win for the company’s total plant solution, the value involved in taking on board Alstom expertise and how GE is helping governments meet their commitments under the Paris agreement.
Power Engineering International (PEI):How long had GE been in discussion with Sonelgaz about this project and did it take long to discover the efficiencies possible through this deal?
Paul McElhinney (PM): “We’ve been working with Sonelgaz or well over a year trying to put this together. Algeria has been a great customer for us for five years and Sonelgaz has been a great customer for GE for decades.
In order to show you can make an impact, you have to develop a baseline. Its relatively easy to do that on a steam turbine or a gas turbine but when you start talking about boiler per generator performance, Balance of Plant, multiple vendors, multiple OEMs it has taken us a while to develop.
You also have to take account our capabilities in these new areas, to service other people equipment, to bring digital solutions. It takes a while for people to get their arms around of all of this, and its amounted to a year of detailed collaboration.”
“The deal is significant in terms of value, by far the largest deal we have done in our history.”
VALUE OF OPTING FOR TOTAL PLANT SOLUTION
PEI: The agreement will help Sonelgaz save up to $2bn in gas that can be made available for sale in international markets. How does this offering produce such significant savings?
PM: “We spoke recently about this strategic change going on in terms of our business model and how we engage in customers. We’re moving away from the physics of individual pieces of equipment on the power island to more of a broad-based total plant solutions type of conversation.”
“This deal is a good example of how all of that strategy we’ve been employing since we brought Alstom into the family, how that actually works in the real world, bringing benefits to GE and to customers.”
“Here we brought our traditional gas turbine technology focus together with total plant capabilities beyond the gas turbine, together with other OEM capability beyond GE equipment, together with digital together with operations and maintenance capabilities we are developing inside the business. You really have a deal where our new business model shows we can work with a customer and deliver compelling solutions we wouldn’t have been able to deliver three years ago.”
“This is a 20 year partnership with Sonelgas covering 34 of their 9FAS (turbines). We’ll upgrade those units. We’ll do some rotor replacements We will bring our O&M business to bear in terms of giving them the opportunity to hand over some of their plants to us so we can help run them more efficiently.”
“We’re going to train 1,000 of their employees, going to do some localised manufacturing in Algeria on parts of their business. We’re going to qualify their business to do some local repairs for us. And we are doing some software specific applications that we think will really drive efficiencies in their business.”
“On the O&M side we’ll cover 10 power plants across the county, where we will team with Sonelgas and provide the expertise to deliver significant potential output improvement. We see we can deliver up to 6 per cent in terms of operating those power plants.”
“On the digital side we are bringing our asset performance management and operations optimisation software to bear. We have already had some significant wins in some of these applications in the Middle East. We’ll bring all of this together to a focus on how we and Sonelgaz drive total plant improved performance including digital outcomes that they have not been able to do in their plants up to now.”
PEI: If such a saving can be made in Algeria it must surely set other countries with similar resources to thinking they can emulate that at their own scale?
PM: “This is the journey, and that’s not a presentation slogan. We are going from a focus on the physics of an individual piece of equipment on the power island to being able to partner with a customer to optimise total plant performance.”
“We would not have been able to do this without the Alstom capabilities inside the family. We would not have been able to do it without the digital capabilities that we have been investing in in GE now for four years. It’s the new generation of service offerings that we think will provide real value to customers. You’re starting to see that with this deal.”
THE ALSTOM INFLUENCE
PEI: Is that the nature of this Alstom influence? That holistic way they would have worked prior to the GE-Alstom acquisition?
PM: “Before the Alstom deal we were a good competitive gas business. Now we are a much-improved steam business, much improved generator business. We are doing boilers service for the first time in our history, we are capable of servicing other people’s equipment for the first time and we have got digital solutions that have got beyond the laboratory phase to driving real world solutions applications then driving value for customers.”
“Strategically we are focused on the O&M space as a very interesting additional solution for customers. The journey has taken almost two years and our customers are beginning to see this is real in terms of value.”
Has there been other significant wins feeding into Total Plant solutions in the Middle East up to now?
“In terms of O&M we have over 30 sites that we partner with customers on and we have signed almost 10 in the last 9 months so the acceleration of customer adoption of that piece of our business is, I think, very interesting. With digital, we have gone from a couple of reference customers in the Middle East and North America to now having fairly advanced adoption by big customers across most of our big regions.”
“All of these pieces show real promise in terms of customer adoption. Sonelgaz has asked us to bring everything in one place. Some are just O&M, some just digital, but this is a milestone for us in having a customer that wants everything deployed. It really has the potential to be compelling in terms of value.”
ELIMINATING UNSCHEDULED DOWNTIME
PEI: A big part of the technology’s merit is about the elimination of unscheduled downtime. would you have the detail on all that downtime the company is able to eliminate in order to improve productivity?
PM: “One of the advantages of the new power services is that we have inside our business over 100 million operating hours of data. We talk about deploying more sensors and collecting more data from our equipment but we already have that data to begin with. That is a mine of data that our technology experts can use to create new insights that can help customers.”
“If you look at it historically we have used less than 5 per cent of the data we collected actively with customers. We are now at a point where we are leveraging all of the data we have to really collaborate with customers on what you can do to predict and prevent catastrophic failures.”
“Not all events are catastrophic failures, some of the failures we have to work with Sonelgaz on were relatively minor, that would have taken a day or two to resolve with the traditional approach. Some of them have the ability to predict significant impacts and when you think of the power demands in Algeria and how important these plants are; that they can continue to be run at maximum output you very quickly get to a place where being able to help predict or prevent failures whether minor issues or significant major unplanned outages, that’s real value for Sonelgaz.”
PEI: This is also good news for Algerian employment with engineers set to be employed for spare part operations in Algeria. How many are expected to be employed initially and later as the facility becomes part of the international supply chain?
PM: There is potential for us to really leverage the localisation expertise in Algeria with some new capabilities. I think we have the potential to expand that relationship but that’s something we will discuss and plan over time with Sonelgaz. Right now, we have given a commitment that we localise some specific 9FA repairs, localise specific gas turbine manufacturing, take the O&M expertise in GE and train some of the Sonelgaz field engineers and operators on industry best practice. Bringing these two great business together means there is a lot of potential where we can take this in the future.”
PREDIX PLATFORM ENABLING ENDLESS APPLICATION POSSIBILITIES
PEI: GE’s Predix technology is back boning the overall software drive behind projects such as has been agreed with Sonelgaz. Can you tell us about the breadth of technology now available to power plant owners in terms of scope for optimisation?
PM: The overall software initiative in terms of investment from GE is four years old. Predix we made available to customers in 2016 and it is the foundational operating infrastructure on which we run the applications. The applications are what really deliver value to customers. Whether that’s operational optimisation applications, or asset performance applications, it’s individual applications that can improve the efficiency, reliability and output of pieces of equipment or in the case of Sonelgaz, total plant across the power island.”
“We have new applications being written literally every day of the week on Predix. There are specific targeted applications with Sonelgaz but their agreement to deploy Predix across total plant allows us to make available the entire menu of applications so they have an open door to everything we are developing. Then we will decide over time what they want to use and how much we can work together in deploying additional applications.”
PEI: So Predix is enabling a constantly evolving application resource for customers? That has to be an exciting aspect for all involved.
PM: “The strategic questions when developing Predix was whether to make it closed source or open source. Open source is like the iPhone where there are thousands of new apps being delivered every day. We have decided to go open source – so we have invited software developers all over the world – we have over 10,000 active software developers designing applications on Predix right now. That obviously spans healthcare, aviation, transport as well as power but we have really opened this infrastructure up to anyone in the world that has something creative or helpful and then customers like Sonelgaz by doing a strategic partnership with GE have a front row seat at the development of all these new applications and over time some of those can really help real value.”
HELPING GOVERNMENTS MEET THEIR PARIS OBLIGATIONS
PEI: How much of what GE is doing in the digitisation space for power can help governments meet the emissions goals set out in the Paris agreement?
PM: “Everyone is under serious pressure to meet the commitments set out in Paris. Coal will continue to be a significant source of power generation capacity not just for a year or two – but even 20 or 30 years from now.”
“If you look at a global power generation capacity map coal continues to be a significant contributor for 20 years and beyond. The challenge for people is how do you get the emissions to be more environmentally acceptable.”
“We have technology that we have developed by bringing Alstom and GE steam turbine technology together that can significantly reduce emissions. I am talking about double digit, immediate impact on emissions by deploying new technologies and upgrades we have available today. We have very active conversations at governmental and customer levels in the big coal producing areas of the world. In India, China, north Asia, South Africa we have -advanced conversations about deploying technologies that can help them and their governments meet, and in some cases, exceed the commitments they made in the Paris accord. It’s a big focus of our business right now.”
PEI: Algeria might be perceived as a vulnerable country in terms of global security. Does GE take that into account when entering into these kinds of deals?
PM: “We are very conscious in working with customers in prioritising Environment, Health & Safety as key strategic imperatives for both our customers and our employees. The good news for Algeria is we have been working here for 40 years. We like the country and the ability of the technology we have to help the country. Our commitment is for the next decades and beyond so it’s the natural evolution of a long term partnership between GE and the government of Algeria.”
“You will see similar whether that is in Iraq or Egypt where we have strategic partnerships with government and customers across the region and it’s a great opportunity for GE to help. This is what our employees want to do. We develop technologies that we believe can make people’s lives better.”
“Powering parts of the world that need more power or need more access to reliable power is one of our strategic imperatives and we think of this agreement as a good example of us being able to do that.”
Algerian contract is GE Power’s largest ever services deal