Siemens is going through a rough patch.  The German engineering conglomerate’s profit fell 57 percent in the first nine months of this fiscal year, and last week its finance director, Joe Kaeser, said that industrial markets are unlikely to rebound to 2008 levels soon.  The company, which has more than 400,000 employees, recently said it would resort to layoffs. And it’s working hard to restore a reputation tarnished by a bribery scandal that erupted a few years ago.  But there is a bright spot. The company said last week that revenue from its environmental portfolio rose 11 percent in fiscal 2009 to 23 billion euros ($34 billion). It expects that to hit 25 billion euros ($37 billion) in 2011 as countries continue to spend money on stimulus programs that have a strong green component and it buys rivals. (Siemens doesn’t break out profit on the green portfolio.) New products are also driving the business, like a new generation of gas turbines, and acquisitions, like Siemens’s $418 million purchase last month of the Israeli solar thermal energy company Solel Solar Systems.  The products inthe Siemens environmental portfolio include energy-saving devices for buildings, lighting, transportation and industry, as well as other environmental technologies in the health care sector. To qualify for inclusion in the portfolio, a product must reduce greenhouse gas emissions or help combat water and air pollution. For the third year in a row, the portfolio’s revenue and carbon dioxide savings will be audited by PriceWaterhouseCoopers.  Peter Löscher, the chief executive of Siemens, answered questions from Green Inc. about the company’s environmental business by e-mail.  When did green products become important for Siemens?  We have not just recently switched to green business, but environmental protection has a long tradition at Siemens and sustainability has been an integral part of our corporate culture since Siemens was founded back in 1847. We were the first organization with companywide responsibility for environmental protection already in 1971. So our 70,000 employees in the U.S. think green ever since. Due to the global discussion about climate change, Siemens’s focus on environmental care has now become more visible than in the past. It is now common knowledge that we offer the broadest range of green products. We have the world’s most energy-efficient gas turbine. We are a world leader in offshore wind farms and steam turbines for solar thermal power plants. We have the world’s fastest train, which consumes only 0.1 gallons of gas per 60 miles and passenger, as well as state of the art air and water cleaning technologies or even energy-saving lamps and loads of other products and solutions that help to protect the environment.  How are you addressing competition in the area of environmental equipment and services?  The decisive point is that we have to prevail against our competitors. And we look good here. Siemens is rigorously oriented to megatrends. These include climate change, which will transform environmental technologies into the leading industry of the 21st century. At Siemens, green, energy-efficient solutions are already generating a quarter of our total revenue. And this is increasing every day. We have the largest portfolio of green technologies in the world. In fiscal 2009, our customers reduced their CO2 emissions by 210 million tons by using green Siemens products. Despite the current economic crisis, we managed to increase our revenue by 11 percent year over year up to 23 billion euros ($34 billion) in 2009. Green technologies will keep growing as if there was no crisis, whatsoever.  Why did you acquire Solel and how will it help Siemens?  After acquiring our wind power business in 2004, we have rapidly and highly successfully expanded it and we are No. 1 in offshore. We now want to repeat this success story in the solar sector. With the acquisition of Solel, Siemens is strengthening its market position in the promising business of solar thermal power plants, also known as concentrated solar power. Siemens had been supplying key components for solar thermal power plants for years. In the future, we are capable of designing and building entire solar farms. We are now technology leader in the solar thermal business, where we have a very promising environment: Until 2020, this market is expected to grow nearly 20 percent per year and reach a total volume of up to 23 billion euros.  What are your larger plans for North America, including Mexico, after your recent orders there?  The U.S. wants to produce one-quarter of its energy from renewable sources by 2025. That is a paradigm shift. The U.S. already is and will continue to be one of the world’s fastest growing wind energy markets. We significantly aim to further increase our share in the wind and solar power production in both North and South America. To meet this goal, we do invest a lot. In 2007, we opened a rotor blade manufacturing facility in Fort Madison, Iowa. In 2008, we established our first U.S. wind turbine R.&D. competence center in Boulder, Colo. And currently Siemens is building a new wind turbine production facility in Hutchinson, Kan. With tha, Siemens is going to add 400 new green jobs to its total U.S. work force of some 70,000 people. And again we are contributing to the resurgence of the U.S. manufacturing base. I see other green topics with huge potential. In the government’s stimulus program, $3.4 billion is earmarked for smart energy grids alone, a field where Siemens is already market leader with almost $1.5 billion in revenues annually. Furthermore, $8 billion for the construction of high-speed rail lines. We’ve managed to win five of the last six tenders for such trains globally and we are a global leader for intelligent and energy efficient power distribution.  Mexico also offers good perspectives for renewables. The latest wind power contract of $270 million in Mexico is a good prove point for this.  What is the significance of your newly developed gas turbine?  We have invested some 500 million euros ($743 million) in development of this powerful engine — and this has paid off. We combined the best out of our own knowledge and the formerly acquired Westinghouse turbine business.  Our brand new gas turbine is not only the largest ever built but also the most efficient one. It has successfully completed testing at our customer E.ON, the biggest privately owned utility in the world. In the process, it has posted a new record, running for more than 1,200 hours at full load. Once the gas turbine has been connected to a steam turbine, as a combined-cycle plant its output will rise to more than 570 megawatts, thus providing electricity for some 3.2 million people. That’s almost enough power to supply every household of Germany’s capital, Berlin, with just this single turbine. The efficiency of the combined-cycle plant is projected at over 60 percen, which is also a world record. That’s reducing the operational expenditure of our customers and is also good for the environment.  Is there hope to believe that the Desertec project eventually will be built?  The so called DII project is designed to provide a sustainable supply of electricity to North Africa, the Middle East and Europe on the basis of renewable energies. This project has been in the drawer for 30 years and can now be realized at last, due to technological advances and decreasing costs. Solar thermal power plants have been tried and tested for 20 years and we have built electrical highways to transmit power over long distances, which are fully operational, so-called HVDC technology. Over the last 20 years, the costs for one megawatt wind power onshore have dropped from 3 million euros ($4.5 million) to one million euros ($1.5 million). The same is happening for solar energy. The aim of parity between the generation costs of solar electricity and consumer price, the so-called grid parity, is no longer far away. End of October this year, 12 companies and the Desertec Foundation signed the articles of association for the initiative “DII ltd.” DII will map out a detailed investment plan by 2012 — which is pretty ambitious taking into consideration the sheer size of the project. Siemens intends to be at the forefront of this initiative.
Peter Löscher, chief executive of the German engineering conglomerate, answers questions about his solar and wind business and the American clean-tech market.