At Smiths Group, the world’s response to the energy transition is central to our business model and our strategy. We are proud of the work we do in enabling a sustainable future and we have played a key role in this important area for many years.
The recent introduction of bold and ambitious green energy initiatives such as the U.S. government’s Inflation Reduction Act (IRA), the EU’s Green Deal Industrial Plan and most recently the British government’s “Powering Up Britain” initiative, represent a pivotal moment for investment in a broad swathe of clean energy solutions.
At Smiths Group we believe this will lead ultimately to a positive outcome in the global response to climate change and a race-to-the-top in terms of stimulating future energy projects, supply chain capabilities and the development of new engineering talent. But what are some of the challenges and opportunities that this presents? Here we look at just a few of the big areas of interest and debate.
Clean energy investment opportunities and new business models
The biggest opportunity that derives from these initiatives is the massive investment into clean energy infrastructure. The European Commission estimates that global investment in the green transition is set to triple by 2030, from $1 trillion last year. From hydrogen to CCUS; GHG emissions reduction to sustainable aviation fuel; and the electric vehicle battery value chain – the opportunities are set to be game-changing.
We are already observing a race to capitalise on clean energy projects as the U.S. government’s tax credit incentivisation spurs new and existing players to scale quickly. Most of these large capital projects today rely on existing products and solutions, not new technologies. However, as new ecosystems develop and operators seek to reduce the overall cost of deployment and ownership significantly, new technologies will undoubtedly play a larger role. New business models will also emerge as companies seek to discover ways to capture rapidly maturing value pools.
Most recently, the British government published its plans for delivering Energy Security and Net-Zero, including a focus on CCUS and hydrogen projects. This comes at a critical time, following the IPCC’s warnings that the world is likely to breach the Paris goals of 1.5°C additional warming in the 2030s.
We look forward to seeing the positive impact that the targets outlined by all of these green initiatives will have on the industrial technology sector.
Smiths Group is investing in advanced products and solutions that underpin the next generation of mission-critical, low carbon technologies and services, including ultra-high-pressure hydrogen gas seals to meet more challenging operating environments and new methane detection and mitigation solutions. We’re also continuing to improve the reliability and energy efficiency of our products, helping customers reduce overall costs and increase energy security. These are just some examples of many new investments in the space – with more to come in the coming months and years.
Digitisation and big data
Digitisation will play a key role in the development of new energy markets. We believe this will be an area of growing importance – for example in detecting and reducing methane emissions. There is a provision in the IRA that penalises methane emissions, and clean energy incentives are linked to verified data – so it becomes important to be able to measure and monitor key GHG emissions such as methane, carbon dioxide, etc. We are incorporating digital internet of things (IoT) capabilities into our products, to accurately predict equipment life, increase plant availability, and lower overall cost. We expect this trend to continue apace across the whole of the industrial technology sector.
Talent and supply chain bottlenecks
Unsurprisingly given the huge incentives available, there is a race (especially in the U.S.) to get projects started quickly, which may lead to supply chain bottlenecks on certain long lead items. As a result, the industry could experience price inflation on some equipment, and operators and OEMs need to work closely together to handle these challenges. Meanwhile, labour and talent shortages come sharply into focus, given that job markets are generally tight, and many industries are transforming at a historic pace. The development of large-scale clean energy infrastructure will require a significant growth in the pipeline of skilled engineers and operators (e.g., people with hydrogen and CCUS knowledge/expertise) and at a pace which has not been seen for nearly ninety years since the race to re-arm in Europe immediately before the second world war.
Dedicated training is needed to reskill the workforce. In the U.S. we expect to see a growth in apprenticeships given the IRA increases the tax credits available in those projects that use apprentices to do a certain percentage of the work. We expect to see increased collaboration across companies in the value chain to fully realise the opportunities, and this is an area we are actively exploring.
This need for reskilling is a global phenomenon and we expect to see this mirrored in other markets prioritising investment in green technologies.
In conclusion, we believe these initiatives will serve to accelerate the deployment of clean energy investments across the globe on an unprecedented scale. It is an exciting time for the industrial technology sector and huge opportunities exist for those who act boldly and swiftly to capture these new market opportunities.
John Ostergren is Chief Sustainability Officer at Smiths Group plc
At Smiths Group, we believe the green industrial revolution will lead to a positive outcome in the global response to climate change and a race-to-the-top in terms of stimulating future energy projects, supply chain capabilities and the development of new engineering talent.
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