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Annual Report 2016

Three ways Wärtsilä shapes the energy markets

Jussi Heikkinen is Wärtsilä Energy Solutions’ Vice President of Marketing & Business Development. With reference to the company’s innovative approach to business development, he talks us through the three most prominent ways in which Wärtsilä has learned to shape the power plant markets.

Talking the customer’s language

The energy markets are currently going through major changes and electricity producers’ businesses are also shifting. Renewables have entered the landscape, but the intermittent supply they provide means that generation asset flexibility has become a very valuable attribute. Our products offer the highest flexibility among thermal power plants and already serve as profitable solutions for many customers all over the world. But to speak generally, many prospective customers aren’t yet familiar with our technology, and in any case tend to be quite conservative when making their decisions.

Getting through to potential customers in established markets like the U.S. was a big challenge at first. No one wants to invest large amounts of money in technologies they are not familiar with. It’s a hard sell, from that point of view. Promoting the features of our technology will not take us there.

We gradually overcame this challenge by changing the focus of our customer meetings to the value we can bring to their business. We started putting more emphasis on highlighting the importance of flexibility, and showing them how our solutions fit their portfolios, and how they would impact directly on their bottom line.

We can really encourage dialogue on a higher level when the customers see that we understand what they do and what is important for them, and that our offering is genuinely of great benefit to them. We’re bringing them something they hadn’t considered before: a new way of thinking about future power generation and often a new business model. Accepting new ideas can be difficult – it’s all about how the story is explained to you. Now we talk the customer’s language. And it’s working.

Introducing concepts the market is waiting for

Any company has to try to push its own products and develop how its brand is perceived. It’s an important aspect of doing business – there’s no doubt about it. But if you’re introducing a whole new solution to a relatively new problem, you have to think bigger. Decisions may need to be made at the governmental – or even international – level to make sure that both the business benefits and the environmental benefits of your solution are understood and have the chance to become a reality. Ultimately, regulation and market mechanisms may need to be adjusted to introduce the new solutions, adequately reward them, and enable investments. By doing this well one can convert a product push to a market pull.

This is one reason Wärtsilä developed the concept of Smart Power Generation. It stands as a symbol for flexible power generation technologies. This successfully shifted the focus from products and Wärtsilä as a supplier to the benefits that power plant flexibility offers to power systems. Once we had transformed our point of view into a real movement, the debate immediately shifted. Customers and international decision-makers were no longer comparing Wärtsilä with the competition. Instead they were asking: “Which direction works best for us, our nation and our stakeholders?”

Both the timing and the implementation of this concept have been critical in its success. Again, this is about storytelling. You may have all the ingredients for success in place, but unless the message is put across in the right way to the right people at the right time, forget it.

Today, Smart Power Generation, as a potent symbol of flexible power generation in practice, is among the four main solutions on the table in discussions of the future of European power generation. This is obviously a great achievement and a superb opportunity for Wärtsilä, but it didn’t come easily. By conceptualising what we do in this way, and demonstrating the value of Smart Power Generation as part of the power system, we’ve made the benefits apparent in a way that politicians can understand, as well as businessmen and engineers. We made something that even slow-moving, conservative markets could eventually accept.

Always looking to the future

You may have noticed by now that we take the long-term view. It’s the only way in an industry with long investment cycles, a strong emphasis on proven technologies, and a strong political component to contend with. But just as we’re gradually becoming able to take advantage of our investment in Smart Power Generation in preceding years, we also need to think ahead to see where the next opportunities lie.

One area of great potential interest to customers in certain regions is conversion to using natural gas with our small- to medium-scale LNG terminals. This has a geopolitical dimension as well as a practical one. If you look at the Caribbean, and at Central America, for example, many countries rely on burning heavy fuel oil because that is the cheapest fuel available to use in their relatively small power systems. Large coal-power plants, huge gas turbines, and nuclear are all out of the question because of their scale.

The oil price is, of course, outside of these customers’ control, and fuel price variations may in extreme cases drive them out of profit. It’s a tricky situation. Our LNG terminals, which bring together the expertise of the Wärtsilä Energy Solutions and Marine Solutions business areas, offer a long-term solution. Terminals allow these customers to make use of a cleaner fuel, getting LNG to where it’s most useful to them – and our multi-fuel engines can even run both on natural gas and heavy fuel, if need be. Thanks to synergies across Wärtsilä’s business areas, we are able to offer the complete package – the LNG infrastructure and the multi-fuel power plant – in a single turnkey project.

I’m sure you’re starting to see a pattern emerging here. With the right ingredients – keeping a close eye on our customers’ business and their challenges, conceptualising what we do, concentrating on the value for the customer to get the message across, and staying focused on the long-term – we’re able to play an active role in shaping the markets. Make no mistake. Behind movements like Smart Power Generation, you’ll find a smart organisation.

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