Energy Drivers – How is GE Vernova adapting to the energy transition through innovation and collaboration? 

00:00:00 - 00:00:51
Lance Mortlock
Welcome to our next episode of the Energy Drivers podcast, recording live from the 2024 Energy Disruptors Unite conference here in Calgary. I’m Lance Mortlock and I’m your host for today’s chat with Heather Chalmers, President and CEO of GE Vernova Canada and President of GE Vernova Hydropower business in North America. Throughout our series, we invite Canadian industrial and energy leaders to discuss key issues, provide insights and ask challenging questions. In this episode, we’re going to unpack the vast changes sweeping across the energy sector and how companies like GE are innovating and adapting to these new energy transition realities. Heather, thank you for joining our podcast and welcome to the show.
 

00:00:51 - 00:00:53
Heather Chalmers
Thank you for having me.
 

00:00:53 – 00:01:03
Lance Mortlock
So, before we dive into our main discussion, how have you enjoyed the EDU conference this year and how has your experience been thus far?
 

00:01:03 - 00:01:38
Heather Chalmers
Well, first of all, it’s exciting to be here. And I am encouraged that we’re convening, or the conference is providing a forum to convene a number of stakeholders, with various backgrounds, various interests, but all in the spirit of having candid dialogues in terms of how do we move the energy transition forward. And you know, I, first day so I certainly everything I’ve seen so far has been exciting and I’m looking forward to the balance of the conference.
 

00:01:38 - 00:01:55
Lance Mortlock
Awesome. What we typically do on these podcasts is give our guests an opportunity to introduce themselves. Tell us a little bit about your background and what maybe excites you most about GE Vernova and what you’re trying to achieve as it relates to the energy transition?
 

00:01:55 - 00:02:01
Heather Chalmers
Great. So, for context, I have been with GE for just over 29 years. 

00:02:01 - 00:02:02
Lance Mortlock
Wow. 
 

00:02:02 - 00:03:19
Heather Chalmers
I know, I started when I was really young. And I’ve had the privilege of working in three different industries. I started off in our plastics business. I’m a chemical engineer by background, and then I moved to our health care business and very much enjoyed leading the health care team for Canada for a number of years. And then most recently, around six years ago, became the President and CEO of GE Canada. And at that point, our scope of practice covered health care. It covered aviation and a portfolio of energy technology companies. And then recently, for those who may not be aware, GE decided to spin itself out from a conglomerate. And we spun out our health care business a year and a half ago. And then on April 2nd, we spun out our GE aerospace business, and we pulled together our 12 energy technology businesses into a company called GE Vernova, so Ver for green and Nova for new. And I have the wonderful, wonderful opportunity to lead that business in Canada. 
 

00:03:19 - 00:03:48
Lance Mortlock
GE Vernova has a mission centred around electrification and decarbonization. And as we’ve witnessed at the conference, everyone’s discussing the enormous amount of change and transformation that is happening in the energy space. Can you maybe elaborate a little bit on GE Vernova, how it fits into this evolving landscape? How does your organization define the energy transition? Because everybody defines it differently in some way.
 

00:03:48 - 00:06:17
Heather Chalmers
Another really good question. As I mentioned, GE Vernova, Ver for green, Nova for new, is literally a purpose-built company to be that partner in the energy transition, whether that’s for electrification or decarbonization. And our portfolio is vast and broad and spans almost every facet of energy. So think about on the power generation side, we have gas power. We have hydropower. We have nuclear power. We have steam power. And in that portfolio, we’re also investing in new technologies. And I can talk about them a bit later on, around small modular nuclear reactors. We’re looking to abate our gas technology, whether that’s through non-CO2-emitting fuel sources like hydrogen or through post-combustion carbon capture as an option. And then follow on to that would ultimately be direct air capture. So a lot of innovation even in the power generation side. Then, we have another vertical, which is our wind power. So onshore wind and offshore wind, a lot of activity happening in that sector as well. And then we have everything, I call it all things grid related, whether that’s on grid modernization, grid optimization, and then using digital tools to support the hardware refurbishment or buildout. So, I always say we’re in this very privileged position to be that partner, whether it’s with governments or utilities or power producers, because ultimately, I really don’t care what technology you use. What I care about is what are those technologies? What is that those puzzle pieces coming together look like optimally. So you can, yes, solve for sustainability. But you can do it in a reliable and an affordable way. And yeah, I use this word privilege. I’ve got to find a new word. But it is a wonderful opportunity for GE Vernova to be in.
 

00:06:17 - 00:06:47
Lance Mortlock
And it strikes me listening to you, you’re at the front line of innovation. You’re at the front line of disruption in some way, because the customers that you serve in the energy industry are, they’re making decisions around installing the equipment and the innovations that GE Vernova comes up with, whether it’s a small modular reactor or a direct air capture system, you’re creating the engineering solutions that will support energy transition in the future, right?
 

00:06:47 - 00:06:48
Heather Chalmers
Yes.
 

00:06:48 - 00:06:54
Lance Mortlock
And are there any particular solutions that GE Vernova has come up with that you’re really excited about?
 

00:06:54 - 00:06:55
Heather Chalmers
Yes, I. 
 

00:06:55 - 00:06:57
Lance Mortlock
The game changers in some way.
 

00:06:57 - 00:09:43
Heather Chalmers
Yeah, the game changers. The first one I would talk about is small modular nuclear reactors. And I would also do it through the lens of Canada playing a leadership role here. For your listeners who may not be aware, but GE Hitachi is working with Ontario Power Generation on the Western world’s first small modular nuclear reactor, and it’s called the BWRX 300. It’s a boiling-water reactor, 10th generation, 300MW. That’s what the acronym stands for. And the plan is for the first one, of a series of four at their Darlington facility to go live end of 2028, early 2029. And it is a wonderful opportunity, and part of, I would say, the renaissance that we’re seeing in nuclear as part of the solution for both electrification and decarbonization. As part of this development, Canada will benefit from being first of a kind. There will be a large portion of the supply chain that will be created in Ontario, and in Canada more broadly, that builds on our nuclear tier-one status, which is really exciting. Not only we’re going to benefit from the CO2-free baseload power, but we do it in a way that creates green economy for Ontarians and Canadians long term. The other aspect that I would talk about this, because I think it’s really important, is that there’s a lot of cooperation that’s happening between Canada, the UK and the US when it comes to creating the ecosystem and the environment to enable nuclear proliferation around the world, and in particular regulatory cooperation. So I just think that there’s a tremendous amount of opportunity. And the final thing I would say here is that the very premise of the small modular nuclear reactor is the modularity piece of it, the ability to rinse and repeat and so that you’re driving down, whether it’s the cost productivity or the time element of building these. Nuclear, as wonderful as it is, doesn’t have a terrific track record when it comes to being on time, on budget. And that’s completely not the intent of the small modular nuclear reactor.
 

00:09:43 - 00:10:33
Lance Mortlock
Yeah. It’s game changing in some way. And one of the things that I have been talking a lot about is, while renewables are important, the wind doesn’t always blow, the sun doesn’t shine. And baseload is really important. And as we saw in Alberta with the close blackouts that we experienced in, almost in Calgary, you need to think about that long-term replacement of natural gas power generation and where is that going to come from? I believe, and I agree with you, that nuclear plays an important role in an energy transition. I don’t think we’re talking enough about it. I’m glad to see that. And I read the Ontario Energy Strategy and plan that is a big part of their continued future, but I think it needs to be part of the future of a few more provinces in this country.
 

00:10:33 - 00:12:51
Heather Chalmers
Well, we are also working with, the province of Saskatchewan and as you mentioned, Alberta, Saskatchewan, New Brunswick and Ontario have all signed a memorandum of understanding, if that’s the actual, the best form. But in terms of advancing the small modular reactor program in Canada. And so we’re having discussions. But I did want to just pull on your thread there around gas power, because I do think there is a role for gas power and I talked about it earlier, that gas power plays a wonderful, it has the opportunity not just to provide base power, but to be that flexible, that reliable firming power to the grid when we need it. And just because you’re using gas power today, you’re buying a future option for abatement. And whether that’s through, as I said, hydrogen as a fuel source or carbon capture as post combustion. And that’s another area where I think Canada can play a leadership role. And in fact, we’re in the process of trying to develop a 465-megawatt gas turbine plus carbon capture project in Alberta. And normally we wouldn’t necessarily take a developer role. But the purpose here is for us to understand the entire project that the balance of plant, the interaction between a CCUS, which is ultimately, really a chemical process that tends to like steady state with gas, which is going to be a flexible load. And how do you marry the two as optimally as possible? How do you capture it? How do you transport it and how do you sequester it? And all the things that are involved in the project development so that we can translate that to the 7,000 gas turbines that we have around the world. So this is just two examples where new technologies that I firmly believe will play a pivotal role in the energy transition, and also ones where Canada is out front.
 

00:12:51 - 00:13:32
Lance Mortlock
Yeah, let’s hope we stay out front. You know, sometimes I think we get in our own way in terms of some of these developments. It can be very frustrating and maybe talking a little bit about those frustrations, those challenges. What kind of client challenges are you seeing, Heather? What advice do you give to executives that are trying to make decisions about carbon capture, CCUS, using some of the GE engineering solutions and equipment that you have., What are those challenges that you see and how do you overcome those?
 

00:13:32 - 00:14:41
Heather Chalmers
We spend a lot of time typically talking about the challenges to get to the final investment decision. And we can dig deeper into those around regulatory permitting and certainty on the on the policy side. But what I would say that’s emerging more and more as a very real challenge, reality are twofold. One is just the people to do the work. It doesn’t matter what technology you decide to invest in, it’s going to take engineers, it’s going to take project directors, it’s going to take commissioning and construction people. And those are very, those are valued resources that are shared across the energy continuum. And they’re in short order. So as a nation. 
 

00:14:41 - 00:14:43
Lance Mortlock
So, so not enough engineers or…
 

00:14:43 - 00:17:04
Heather Chalmers
There’s not, there are different statistics out there that say that the demands on engineering are going to rise dramatically, both just as a general discipline, but when you get into the subspecialties of it, you heard earlier that I also have the opportunity to lead our hydro business in North America. And there are very specific engineering disciplines that we need in order to refurbish hydro, existing hydro power plants, of which 60% of Canada’s power comes from hydro. We have to maintain those plants. So that’s just one, the engineers, the project directors, the CNC. The other is you get into how the work is done. And the reality is we are trying to perform and complete and execute on these massive projects in a world that is fundamentally changed. For many years, the environment was very, I would say, very much steady state, whether that’s on the inflation side, supply chain, government policies, the cooperation between governments around the world. That is no longer the case. And therefore, the ability to cooperate, the ability to problem solve, to innovate, right where the work is being done on those projects is something almost new and at a level and it’s been amplified. And so, I think where you can develop partnerships and you can work with your teams and give them the tools and the muscle to problem solve, to find solutions to these challenges. Despite the best of planning, those projects that are going to be most successful. And I don’t think we’ve given enough time. We focus a lot on the technical skills, but those soft skills of cooperation, collaboration, problem-solving are going to be very material in order to execute on the massive scale of these of these infrastructure projects.
 

00:17:04 - 00:17:39
Lance Mortlock
Building on the theme a little bit. In Canada, there’s a strong push, as you know, towards electrification by many companies across the country. And some of those companies we’ve talked to the likes of Enmax and Hydro One, and many more. Typically, people discuss the need for more renewable generation and storage while grid considerations remain almost an afterthought. You mentioned grid earlier. From your perspective, is our grid in this country ready for the future demands of widespread electrification?
 

00:17:39 - 00:18:42
Heather Chalmers
The short answer to that is no. But Canada is not unique. Whether that’s Canada, the US, the UK. I’ve had the opportunity to have exposure. GE is in 160 countries around the world. And I would share that the world has woken up to the enormity of the challenge with respect to grid. And grid investment, not just building more of the same to different places in certain countries. In our case, it might be the north or otherwise, but fundamentally how the grid operates also has to change. Historically it’s been one-way flow. It’s gone from generation to where the electric.
 

00:18:42 - 00:18:43
Lance Mortlock
The consumer. Yeah.
 

00:18:43 - 00:19:58
Heather Chalmers
The consumer requires it. But that’s no longer the case with distributed energy resources. It’s very much a bidirectional flow. So how do you manage that? How do you orchestrate the grid in order to do that as optimally as possible? The other piece is just the resilience of the grid. The impact of climate change is very real. And you see it with forest fires. You see it with storms, 100-year storms that are happening a lot more frequently than a 100-year storm. So just the resilience of the grid. And then the third piece, I come back to this change management. We, in order to operate the grid using new digital tools, new orchestration software enabled by AI or otherwise, it takes a different way of thinking. And how do we bring organizations along so that they can adopt and use this technology much more optimally because the way we’ve always done it isn’t going to work, and we’re also not going to have the people to do it the way we’ve always done at this scale that we’re going to need it.
 

00:19:58 - 00:20:52
Lance Mortlock
I totally agree with all of that. And we need more investments in our grid to build and sustain the incoming capacity and the reliability requirements we have, frankly. However, as I reflect on our recent experiences in this country with big capital projects in Canada, we’ve had a lot of issues, Heather, to get those up and running and completed. What do we need to do differently to facilitate large-scale investments in the energy sector? Given the scale of getting to net zero and the energy transition requirements we have, surely, we have to do something different. We can’t continue to have these projects that balloon out of control, that exceed their budget. The original financial investment decision budgets like what needs to change in your mind, can it change?
 

00:20:52 - 00:22:01
Heather Chalmers
I’m going to tackle this two ways. The first is how do we get to financial investment decisions. And then the second piece is how do we deliver the projects differently to avoid the cost overruns, the time overruns. Because the reality is both of those things are not on our side. In terms of getting to financial investment decision. I would summarize the challenges, and you’ve heard them a thousand times. The first one is permitting, regulatory harmonization. There’s a lot of overlap and redundancy that we need to find ways to streamline, whether that’s at the federal level, the provincial level or the municipal level to get these projects done faster. And arguably there’s focus on this. There is work being done. You know, as an example, if you were adding on capacity to a brownfield, an existing site, perhaps it doesn’t need to go through the same level of scrutiny and the paces that you would a greenfield site. I’m just using that as a…
 

00:22:01 - 00:22:03
Lance Mortlock
I think it’s a great example. Yeah.
 

00:22:03 - 00:22:48
Heather Chalmers
The other area is just around incentives for these projects. These are costly. And Canada, whether it’s Canada or other jurisdictions in the world, you are competing, you’re competing for capital. You’re competing for people. So do we have the right incentives? Canada in this particular case has made a lot of progress with the investment tax credits. There is still more to come that has to be finalized to get some of the larger projects over the goal line and or encourage non-taxable entities to play here as well. But good progress made. So we’re very encouraged by that. I think the carbon pricing is another…
 

00:22:48 - 00:23:08
Lance Mortlock
But do you believe that good progress compared to the US? I mean, we’ve seen that carrot approach to attracting investment accelerate, at a scale that I think dwarfs Canada, even though the economy is larger. I feel like our stick approach to carbon tax, is it working?
 

00:23:08 - 00:23:39
Heather Chalmers
But that’s different. So you’re talking about the carbon tax versus the investment tax credits. So, here’s what I would compare and contrast. Our investment tax credit approach is to support the capital investment on the front end, where the US, their approach is through a production tax credit on the back end. And so, for things like carbon capture and sequestration, where it’s a heavy capital investment upfront. The investment tax credit isn’t a…
 

00:23:39 - 00:23:40
Lance Mortlock
A good instrument. 
 

00:23:40 - 00:25:58
Heather Chalmers
It’s a decent instrument for sure. But this is where I think, coming to the point around carbon pricing, how do you marry that with certainty on the production side so that you can monetize those carbon credits you’re producing when that plant is operational and there’s work to be done there. And I think certainly the political landscape that we’re dealing in, whether it’s in Canada or in the US, I’m just using those as examples. It doesn’t lead to certainty and investors like certainty. So, there’s work that absolutely we need to spend some time around the carbon pricing, contracts for differences, offtake agreements. There are avenues that can be explored and we can learn from places like the UK and how they’re tackling this issue. We’re not unique, which is a good thing. And this opportunity to learn from our trusted trading partners is something that is underway. And the last one, I would say, which is unique to Canada’s our Indigenous engagement and our reconciliation commitment. There has been work done there,. absolutely. I think some of the advocacy work that we had done was around making sure that Indigenous communities had the ability to participate meaningfully in these projects, with access to competitive financing. And that’s underway with the federal loan guarantee program. But it’s early days and I would absolutely share that these relationships, they are evolving and we’re learning and, we’re learning from the customers that we work with, who are learning with the Indigenous communities that they are working with. We’re far from having this all figured out, but this is another area I think there’s been a lot of cooperation and very good dialogue about in order to advance it. And the reality is the energy transition. There is no energy transition without going through Indigenous lands.
 

00:25:58 - 00:27:57
Lance Mortlock
That’s right. And you know, one thing I’ll flag to our listeners is, in fact, EY teams last year did a study of 36 of Canada’s sort of large capital projects in the oil and gas, the power and utilities and the mining and metals space. And we looked at successful projects and projects that had significant challenges and how the relationship with Indigenous groups worked on those capital projects. And you can find that report online at ey.com/ca if you’re interested. The other thing, Heather, that you said that really resonates with me is just the importance of taking a different approach to brownfield sites. You know, it strikes me when I think about the LNG industry, it took us 14 years to complete, or almost complete, LNG. Canada will be up and running, fingers crossed, next year. It took the Americans six years to build seven facilities on brownfield sites. I think there’s a lot we can learn from our friends south of the border in terms of right sizing the approach based on, that whether it’s greenfield or brownfield, the type of environment that we’re dealing with to get some of these projects built. I believe, and I agree with your earlier comment that natural gas is an important transition fuel. I think there’s a greater role that natural gas can play in terms of supporting net zero. My next question, Heather, is GE Vernova works closely with various market players in the energy sector. You know, on our podcast, we’ve had important organizations like Parkland, Enmax, Hydro One, Suncor, leaders from all of these companies. How has your relationship with some of those partners evolved, and what does collaboration look like in the future for GE Vernova working with some of these clients in Canada and more broadly?
 

00:27:57 - 00:30:45
Heather Chalmers
Building on my earlier remarks with respect to the need for cooperation, collaboration, problem-solving, we’re hardwiring that via different counteracts. And I’ll give you a couple of examples to illustrate that. Regarding the small modular nuclear reactor program with Ontario Power Generation, two unique models frame that project. The first one is we are in partnership on building the common design. That common design that we will rinse and repeat over and over again to get the variable cost productivity and the time decreased. And so we’ve got four partners in the common design development, which is unique. And you get the perspectives of each of those partners as we build out the first-of-a kind first unit, I’m not articulating that well. And that in and of itself is very unique because traditionally GE would have gone at this alone. But we’re learning from what our other partners bring to the table. The second one is on the integrated delivery model. And this is where the four partners are all incented through a shared risk-reward model to a common outcome. And that only promotes the problem-solving. There’s not a pointing of fingers when something inevitably goes wrong or an unforeseen challenge is presented. The contract itself it’s geared to promote that problem-solving. And all parties benefit from any risk, but they also benefit from the reward if we do this well along the way. So that shared outcomes approach. And the third contract innovation that I’ll talk about is what’s called frame agreements. And we’re doing this in our hydro refurbishment. And in this case, it happens to be with Ontario Power Generation as well, we’ve got an agreement to do a number of hydro refurbishments over a long period of time, 15 plus years, with target pricing also with a shared risk-reward model.
 

00:30:45 - 00:30:47
Lance Mortlock
So, you’ve got skin in the game.
 

00:30:47 - 00:31:33
Heather Chalmers
Everybody’s got skin in the game. But the frame agreement and the long-term nature of the projects gives us certainty so that we can make the necessary investments in our people and in our supply chain, and also the supply chain that we rely on. They have volume certainty. And that’s allowing us to do things very differently and much more productively and optimally than one RFP at a time approach. So, kind of just three different examples of contractual innovations that are supporting that pace and scale. And I keep saying the cost productivity that we’re going to need in the energy transition.
 

00:31:33 - 00:32:03
Lance Mortlock
It’s very cool. And it you know, reflecting your comments, I always think of GE Vernova as engineering innovation. But commercial innovation needs to happen at the same paces as the engineering piece. Fascinating. You’ve talked a little bit already about, and you’ve touched on the need for regulatory change. In your view, how should the regulatory framework in this country adapt to support the initiatives and the investments at the speed that we need them to happen to get to net zero?
 

00:32:03 - 00:32:34
Heather Chalmers
I’ve talked about this a lot as my Team Canada approach, and my advice has remained consistent. That I think there is value in picking a handful of large infrastructure projects that represent those technologies or those solutions that will need to be replicated over and over.
 

00:32:34 - 00:32:38
Lance Mortlock
Kind of signature issues, yeah.
 

00:32:38 - 00:33:34
Heather Chalmers
And get the federal government, the provincial government, the municipal governments, all the different actors together and literally walk through the pieces, all the necessary approvals and permits and have a thoughtful discussion about what is value added and where are there places to eliminate or reduce redundancy. Also, in the spirit that time is not on our side. And if fighting climate change or electrifying is our number-one priority, everything else also can’t be a number-one priority. And I think by going through that exercise, it would unlock a tremendous amount of insight and ultimately potential to do this better.
 

00:33:34 - 00:33:45
Lance Mortlock
Make sense. Heather, before we conclude, is there anything else that you wanted to share? Anything that I should have asked that I didn’t ask before we wrap up?
 

00:33:45 - 00:34:53
Heather Chalmers
We talked a lot about the challenges of the energy transition, but the marriage to that or the counter to that is a tremendous opportunity. The scale of these projects, the pace of them it, what an exciting time. Like what an exciting time to be part of something that arguably is going to change the future of the world. And I’m incredibly encouraged by the innovations that we’re seeing in Canada, in North America. I’m encouraged by these events today. I’m encouraged by the discussion that we’re having today. When I think about the economic opportunity, if we do this right, it’s just wonderful. Never mind the opportunity to also participate with something that’s got incredible mission and purpose.
 

00:34:53 - 00:34:56
Lance Mortlock
I think it’s a privilege to lead during these times.
 

00:34:56 - 00:35:08
Heather Chalmers
I do. It’s a privilege. It’s a responsibility and I don’t take it lightly.
 

00:35:08 - 00:35:16
Lance Mortlock
No, no, neither do I. Well, we’ve run out of time. Thank you, Heather, for your time and insights. Been a pleasure having you here.
 

00:35:16 - 00:35:17
Heather Chalmers
Thank you. Thank you for having me.
 

00:35:17 - 00:37:08
Lance Mortlock
We’ve had a great discussion on the future of the energy sector and how GE Vernova is helping shape the future through innovative technologies and collaboration. For our listeners, if you have any questions or comments, please feel free to reach out to EY teams via the attached contact details. As we wrap up another insightful conversation, here are a few of my key takeaways from my conversation with Heather. The energy transition is accelerating. Heather underscored the pace of energy transition is only increasing, driving innovation and unprecedented pace. It’s clear that energy markets and the future will look vastly different from today, with rapid advancements and new technologies emerging to meet the evolving demands. Secondly, organizations like GE Vernova will only become more prominent. Born out of the need to address imminent challenges in the energy sector, GE Vernova is strategically positioned to become even more influential. The organization is actively developing and introducing innovative engineering and technology solutions, positioning its clients to not just cope with, but lead the change in the energy transition. And finally, we have an urgency in infrastructure deployment. To match the momentum of the energy transition, Infrastructure deployment must accelerate, especially in the Canadian grid. Heather highlighted the need for more collaboration, new risk-reward investment techniques and regulatory agility, which are all essential for realizing the full potential of this transformation. Once again, thank you to our listeners for joining this podcast. We’ll see you on the next episode.