Siemens Energy Considers Investing in U.S. Power Grid Modernization Efforts

Germany’s Siemens Energy considers setting up production in the United States to take a slice from the country’s efforts to modernize its power grid. The market is expected to reach trillions of dollars following the Inflation Reduction Act (IRA). The plans are part of Siemens Energy’s broader effort to expand presence in the United States, where it makes 15% of its sales, as market friendly regulation is providing a boost to renewables and hydrogen capacity that requires advanced energy networks. It also comes at a time when the U.S. and Europe are implementing competing plans to make the market more lucrative for the industry, ranging from utilities to steelmakers, to expand businesses despite soaring energy and raw materials costs.

“What drives the U.S. market is the long-term predictability of subsidy conditions under the IRA. Any investor can fairly quickly do the maths on the back of an envelope to figure out the benefits,” Siemens Energy Chief Executive Bruch said.

“This is much simpler and clearer than in Europe,” he pointed out.

While he tried to ease concerns that a bigger presence in the U.S. would not come at the expense of Europe, he said the company would think carefully where to allocate resources going forward.

U.S. power grids are not directly benefiting from the IRA but will require around $2 trillion in investments by 2050 to make sure that energy sources eligible for support, including renewables and hydrogen, can be integrated.

“This means that one has to invest in manufacturing capacity,” Bruch said.

The company is assessing whether to set up production of network equipment such as transformers, a key component of energy grids, in the U.S.

Depending on whether these would be greenfield sites or building on the group’s existing 26 locations that include hubs in Florida, North Carolina and Texas, a factory could cost a triple-digit million euro sum.

The German energy company has recently revealed plans to restart two idled onshore wind turbine component plants and build two new offshore wind turbine production sites in the United States, if it becomes successful in local government tenders.

Building local offshore wind turbine factories was costing “substantially less” under the IRA than in Europe, Bruch said, also noting the legislation’s positive impact on the hydrogen value chain, a field where Siemens Energy is active, too.

The group is currently ramping up electrolyser capacity at its Berlin plant in a joint venture with France’s Air Liquide. Bruch says U.S. customers had already made capacity bookings.

The Hydrogen Production Tax Credit, a key component of the IRA, provides a 10-year federal tax credit of up to $3 per kilogram for clean hydrogen produced after 2022 from facilities that begin construction prior to 2033.

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