Keywords: ABB, Analytics, Baldor, Measurement, Water Industry.
The North American water unit of ABB recently visited ARC Advisory Group for a briefing and discussion. Water is one of the four vertical industries for which ABB created global initiatives (dubbed "ISIs") several years ago. We learned that the company has wrapped up its global water initiative, with the focus of business development now shifting to the North American region. Why North America? ABB feels that it has successfully developed water business capability elsewhere and now North America offers new opportunity given that the firm has acquired both Baldor and Thomas & Betts. In addition, the large ABB installed base of measurements and automation systems is ripe for upgrades. The new Symphony Plus system and recent upgrades to ABB measurement products now seem to be the ticket for this market.
"Smarts" for New and Old Water Systems
Global investment in new water infrastructure is concentrated in the Middle East and Asia, but developed economies struggle to serve modern consumers with water infrastructure that in many places is aging and very difficult to manage. London's water infrastructure began operating in the year 1247 (talk about legacy!) but today much of the 20,000 miles of pipe in London's system consists of leaky cast iron relics from the 19th Century that cannot be replaced quickly.
Instead, London has applied automation intelligence using several thousand strategically placed smart meters and developed analytics to find and repair the most serious leaks. ABB believes that many North American cities will end up doing something similar, albeit on a more manageable scale.
Some Global Cities with Stated Non-Revenue Water Rates over 20%
(Source: SWAN Forum)
London is not alone in possessing a very leaky water system. Globally, 20-30 percent of treated and pumped water is lost. The industry term for this loss is "non-revenue water" (NRW). In some cities the fraction of loss is far higher than average (see figure above). Reductions in NRW translate into immediate reductions in pumping and associated energy costs, which represent a major expense for water utilities. One solution is to develop "smart water systems" in which analytics can be applied to existing and new water system data to focus scarce maintenance and replacement resources where they will provide the largest benefits.
Smart Water Systems
Smart water systems are built on five layers, according to the Smart Water Networks (SWAN) Forum. The lowest layer is physical (pipe). The middle three represent measurement, automation, SCADA, and visualization (the "bread and butter" of automation companies like ABB). The top layer is specialized analytics that can model the physical water system and apply this model to water system data to perform various analyses. This area is highly specialized and ABB has acquired capability here by acting as the lead investor in TaKaDu, an Israeli venture-stage software/services firm that has developed this discipline. TaKaDu's customer list includes Thames Water, the largest water system operator in London.
TaKaDu provides water system monitoring using a SaaS business model. TaKaDu software aggregates measurement information from the various automation systems in place and can also leverage GIS data and EAM work history. Its objective is to alert owners to possible leaks, inefficiencies, and faults in the network by applying a set of analytics regularly and allowing owner-operators to focus on exceptional situations rather than spending most of their time managing data.
ABB's investment in venture-stage TaKaDu is one of a dozen such investments in the smart energy and cleantech space that the company has made through ABB Technology Ventures. Other investments include Trilliant (smart meter networks) and Industrial Defender (cyber security for automation). ABB pursues this form of investment for small and fast-moving but strategic technologies. The objective is to enable the venture to enjoy more operational freedom and for ABB to be able to apply its technology in ongoing projects without having the day-to-day responsibility for managing its development.
North America Focus
Why take a renewed focus on the North American market after a long period of relative neglect? ABB says it has several important strengths, mostly new. Given that the company has a very large North American installed base in the water industry, ABB senses real opportunity. The new factors include:
Baldor – Through the Baldor acquisition ABB is now a leading supplier of NEMA motors, complete with channels to the US market. The US water market did not spec ABB's IEC motors and probably never will, so owning Baldor represents a sea change for ABB in the North American water industry.
Symphony Plus – Water plants in the installed base that originally used Fischer & Porter, or Bailey, or ABB Symphony automation systems can benefit from ABB's decision to develop and support Symphony Plus (which was released in 2011) as an automation platform with an easier migration path, and one that effectively integrates SCADA from the many small remote locations in water systems.
Measurements – ABB is in the midst of an update to its entire measurement portfolio. The company has a strong line of updated products for magnetic flow and pressure, the industry's main measurement purchases.
Electric Power Infrastructure – ABB can act as an "ICE" contractor (instrumentation, control, and electrical) for both new and retrofit water projects. Again, owning Baldor and Thomas &Betts provides ABB with the breadth that gives this claim far more credibility that it would have had just two years ago.
The main challenge to ABB's plan will be to develop and cultivate market channels. The US water business splits about 80/20 between municipal and private ownership. To effectively reach the municipals requires long and painstaking efforts, which is why cultivating the right channel partners is critical. This is going to take some time, probably several years to fully pan out, but ABB does understand this market and is moving in the right directions to address it.
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