Jeff Immelt has also put in place a special funding mechanism for products that we term “imagination breakthroughs.” One such product is the Variable Frequency Transformer (VFT). The development of this device is a great example of how GE is learning to use scale and technology across its business segments. The VFT was a development that came about through collaboration between GE's hydro, motors and drives, and controls businesses. The VFT is essentially an application of already proven technologies.

Dudzinski: We're starting to see advantages from internal collaboration in our EMS products. For example, we are working with China Light and Power by embedding functionality for automated transmission line control. Something that was an off-line process for them is now an on-line process with the implementation of the new system.

Niehage: We are investing in technologies that will enable us to extract additional value out of the existing network. But at the same time, we are looking to bring advances in technologies to limit the number of blackouts. We have enhanced existing tools to optimize directional power flow using fast microprocessors to collect information with even better resolution.

We can now monitor phasors, which enable us to see disturbances coming from instability in the network that could lead to incidents, enabling us to respond to situations much earlier than before.

Pacyna: Today when I talk to mid-level and senior utility management there is an openness to hear about new technologies for the transmission and distribution networks, but at the same time, there is a need to monetize the benefits. Customers say, “I'm interested in listening to your pitch about technology, but show me how it's going to make me more efficient, save me money or make my reliability statistics better.” I sense a much greater willingness to consider new approaches and ideas.

For example, TXU is, in my view, a first mover and an early adopter of new business models, new approaches and new ways of running a utility.

The CEO of TXU is very business oriented, and I believe that a lot of the decisions he makes are related to his desire to not only improve customer satisfaction, but also to move the share price of the company in a positive direction. When you go down into the organization, the experts, the technology leaders, the operational leaders, they have translated his messages to a language that relates to their worlds. So, we are seeing the company embrace broad strategies including broadband over power line and distribution automation. TXU is bringing in technology to make their assets more efficient, but always the measuring stick is: What is the monetizable benefit for spending that money?

Siemens provided TXU's SCADA/EMS and they have been early adopters of our technology releases. They are experts at translating information from the SCADA/EMS level to implications for their grid assets and are now introducing a distribution management system strategy as a companion to EMS.

Jucker: When it comes to research and development (R&D), we invest around $1 billion annually. One of our focus areas in R&D is interrupting currents. Insulation is another technology in which we continue to invest. We work hard to keep our leading position in technology. ABB's largest R&D centers are located in Sweden, Switzerland, Germany and the United States. Now we are expanding our reach to other parts of the world. It is not only a cost issue, but also the need for a totally different breed of ideas. We are now making investments in China and India and other locations.

Guillemot: Today we spend 3.6% of our sales in research and development. A part of this budget is not decided internally, but is based on customers' influence. The amount invested varies from one business line to another depending on need. We seek customer input and, for example, input from users' groups to help us better focus R&D spending.

T&D World: Of course, to succeed, we must ultimately meet customer needs. Could you share what your customers expect from you?

Jucker: I see the world becoming more and more specialized. Some utilities continue to maintain their own engineering expertise, while others have decided to rely on companies like ours to provide this expertise. Recently, we have also been asked to provide a methodology to enable utilities to evolve their businesses to take advantage of technology advances. Many utilities also join with us in developing new products to meet their needs.

Our mission is to help our customers to provide reliable energy. The needs, of course, are different in different parts of the world. In China, for instance, transmission is very important today. In India, it is distribution. In North America, utilities are facing the replacement of aging infrastructure. In Europe, it is interconnections as well as the replacement of infrastructure.

Looking globally, in mature markets we need to focus on optimizing the use of the network while upgrading interconnections with the goal to provide fewer interruptions at the lowest cost.

Guillemot: Our customers don't always have the same needs or even the same philosophies. Some customers are prone to invite us to provide technical expertise. Others fill this need with their general staff. But the trend is definitely toward manufacturers providing not just equipment, but also, for instance, providing lifetime monitoring of equipment. We manage a very diverse business portfolio and each business has different drivers for success. Let's take a power transformer; it typically lasts 40 to 50 years. The key issue may be monitoring, but we can't treat transformers like software where we have to deal with releases maybe every six months.

Today, as our relationships evolve with our customers, we not only have to provide a more complete line of offerings, we are increasingly expected to act as experts. And again, this goes back to the specifications of the product. At one time, customers were defining in detail the product they wanted, and we were making it according to their specifications. Today, as we work with customers around the world, we are more likely to propose product specifications that meet global needs. Our relationships with our customers are changing from solely being a provider to being a partner.

Niehage: Here at Siemens our objective is to stay as close as possible to our customers. We will ask, “If you have a need and if we know there is a technology now available, does it make sense to implement it?” We want to make sure we have a standard, reliable solution that will be available to each and every user. A good example is our support of the IEC 61850 standard. From the beginning, Siemens worked closely with others as one of the drivers of this initiative. We understand that this open standard has value, but the concept must be proven to our customers.

Pacyna: There's definitely a new spirit in the United States energy industry focused on facing challenges inherent with the existing grid. We are receiving more “How do we solve the problem?” type questions from our customers.

T&D World: We are constantly bombarded with the concept of building intelligence into the grid. Would you care to comment?

Dudzinski: In terms of the intelligent grid, utilities can't get there in a day. Instead, utilities are looking to evolve toward the intelligent grid. And so, from a product development view, we're trying to provide the migration path that utilities can take, say, to get from a substation that has mechanical protection to a totally new IEC 61850-compliant digital solution. If a utility doesn't have the desire to tackle a full retrofit, they might seek a strategy that spans 5 to 10 years. As things wear out, and as the budget allows, a utility can move toward a fully integrated, connected grid.

We see some utilities that are farther along than others. The National Grid in the U.K. has made tremendous advances with substation automation, asset management and distribution management systems across their entire delivery business. We are now trying to build the tools to allow a utility to quantify the value of more holistic solutions. So, in concert with utility partners, we have developed a process-evaluation tool that enables us to speak a language that the upper-level executives understand.

Guillemot: Look at our e-terra vision solutions package of offerings. After the blackout in the United States, our customers clearly expressed a need to investigate ways to more quickly grasp dynamic situations and develop tools to enable operators to take actions more intuitively and quickly. We've joined with a set of our customers, including American Electric Power, to develop this next-generation product. One key for us as a global player in this industry is to make sure we team up with utilities that are setting the trends.

Gilligan: GE is part of the Smart Energy Alliance (SEA), a group of companies that includes Capgemini, Intel, Oracle and Hewlett-Packard, which is attempting to look at the industry more holistically to deliver earth-shaking performance improvements that reach across silos and are presented in a language that utility executives understand. We are committed to provide a vision of what can be possible for utilities that embrace intelligent grid concepts. We've built a demonstration facility in Melbourne, Florida, to demonstrate the potential of the intelligent grid.

Dudzinski: We see the need to bring innovation in from the outside in a significant way, and that's one of the big reasons why we're such a strong supporter of the SEA. When you bring Intel and Hewlett-Packard and Cisco and Oracle to the table, you get a different view of the world. Intel does not have a culture like Capgemini or GE. Members of the SEA not only investigate interesting technologies, we also discuss how to bring innovation to the marketplace. The SEA is an organization that is looking at a whole host of technologies that might not be pervasive in our part of the business. We ask, “Will this work? Does this provide a benefit?” We are out there testing the market on what it takes to sell the intelligent grid concept and are willing, as a partner, to assume some risk along with our utility customers as we move along the path to a digitally connected grid.

T&D World: What regional differences do you see in customer needs? And how do you respond to those needs?

Jucker: In countries like India, there has already been significant investment in power generation, but now the local utilities must make significant investments in the distribution side of the business. If we take a country like Malaysia, today they have 40% overcapacity in the generation side, yet many areas in the country are not yet connected.