Takao Tsukui 00:00
Technology combined with the right business model can definitely support the demands, the needs, and the changes in the coming decades. I am very, very motivated every day to be in this industry, and being in the industry for over 30 years, one thing that I can clearly say is, you just never get bored.
Dan Bogler 00:26
Welcome to Moving Forward, a new podcast series from Mitsubishi Heavy Industries. Over the course of this series, we will be discussing U.S. energy policy, AI, data centers, the future for gas power, and what the energy transition in the U.S. really looks like from the inside. I'm Dan Bogler. I'm a former Financial Times journalist, and I've been the co-editor of Spectra, MHI's online content platform, for the past six years. Welcome, Tsukui-san. Please tell us a little bit about yourself and about MHI Americas to start with.
Takao Tsukui 01:05
Dan, thank you very much for having me. My name is Takao Tsukui, Chairman and CEO of Mitsubishi Heavy Industries Americas, and I've been with MHI for over 30 years and have just been assigned to take this role from this April. I'm very excited to be here today and looking forward to good discussions.
Dan Bogler 1:26
Great. Let's start with the demand shock. Let me throw a couple of statistics at you. So, the US electricity system is experiencing the fastest growth in a generation. People were predicting that US demand for electricity would decline. It's now rising at more than 2% annually. This is being driven by a number of things: electrification, electric vehicles, but primarily at the moment by the huge demand from data centers. And I have some statistics here from Goldman Sachs that say that data center demand is doubling in the current two years between 2025 and 2027, from something like 30 gigawatts to more than 60 gigawatts. And for the first time, commercial electricity demand is actually outpacing residential demand. You're based in Houston, right at the heart of the energy industry, as we said. When you talk to your customers, to utilities, to grid operators, when you talk to hyperscalers, how do they see what's happening out there, and do they feel prepared for it?
Takao Tsukui 2:36
Well, thank you for the question. And yes, I think everybody is preparing for it. There is definitely a big boom currently in this AI industry, which is not affecting only the energy sector, but also the grid, also the system, the building of the data center itself. So all the surrounding businesses is getting affected. The 2% growth in energy consumption, probably is still maybe conservative. We are seeing a huge demand on this AI sector that may drive that even higher. So I'll give you a number. If we look at the 2025 gas turbines ordered globally, was 100 gigawatts. Just one year prior to that, we were predicting somewhere in around of 60 gigawatts of orders globally for all the manufacturers, but it ended up to be much higher number at 100 gigawatts, the highest ever since the year 2000, and 40% of that was actually United States. So these numbers itself proves how much strong demand there is towards building the energy to support these data center demands.
Dan Bogler 3:56
Yes, absolutely, I can see the demand coming. I can see the, you know — and we'll talk about this a little bit later on — about how much pressure that is putting on timelines and delivery schedules for new gas turbines, but it's also the case that a lot of the pressure is focusing on the grid, the public grid, and whether it can keep up, whether this is bringing new renewables or new turbines or even nuclear capacity onto the grid. What are you seeing there, and are there alternatives to working through the electricity grid? I'm thinking of, you know, what's called behind-the-meter type generation, and can you explain how that works?
Takao Tsukui 4:37
Sure, you can understand that the grid is as much important as the generation because you need to deliver these electrons to the places that are needed. So the investment in grid also needs to be in certain pace to keep up with these investment demands. Now, one solution can be seen that OK, what if you go off the grid and behind the meter, which means the generation asset will be on site where the consumption is done.
Dan Bogler 5:10
So we've already started talking about gas turbines, and you know it's pretty clear that natural gas is functioning as the, not just the stopgap, but the potentially even long-term solution for supplying all the power that is being demanded. What is the effect? Tell us again in detail. What has the effect been on your order book, on the order book in the industry, on the supply timelines?
Takao Tsukui 5:43
There are a strong demand and the constraint in the supply chain. The OEMs are challenging towards, you know, solving that by increasing capacity, and it's happening in the whole industry again. That not only the equipment, but also like labor to build a plant, that itself has a strong constraint. Now, gas turbines are very highlighted because three major OEMs, big, you know, manufacturing companies, stand out in the industry. But all OEMs have announced certain increase in capacity, but we also want to be careful that we don't overinvest, and five years later we find out that it was too much of an investment. So being lean, increasing productivity, utilizing the same, like, assets and facilities, but being more efficient, are some of the challenges that we are taking today.
Dan Bogler 6:55
Could we dig into that a little bit more?
Takao Tsukui 6:57
Sure. We've worked in the past probably 18 months to study where the threshold is, you know, where are rooms with technology that we can improve? Automation, of course, is one thing, but there was 1000s that we have brought up these, not only automation, but areas of what we can do better, you know, areas that we can carve out.
Dan Bogler 7:24
And this is your, you have production sites for gas turbines not only in Japan but also in the US. Is that right?
Takao Tsukui 7:30
That's right. We have in Japan, but we also have in Georgia, Savannah, a full capacity gas turbine shop that we have been supplying over now 14-15 years, and it's been serving all the US customers.
Dan Bogler 7:47
Right. And how do you organize the supply chain, or how do you modernize your supply chain to take, you know, to meet the increase in demand?
Takao Tsukui 7:57
We will be doing investments. New investments will also be forthcoming. It's an ongoing process. It's going to be like a year by year — it's not going to be coming, like, at one time, but there will be additional facilities, of course, to support supply chains. Especially if you think about the gas turbines, there are some core components like the hot parts of the gas turbine, that need to be, you know, produced in a larger capacity, not necessarily just by productivity. So there will be such investments done both in Japan and the United States.
Dan Bogler 8:32
Thank you. And if you step back now and look at the boom in demand and so on, and if you think that it's going to take several years to build and deliver a gas turbine, and then this turbine has an operating life of, I don't know, something around 30 years. Is it still fair to talk about gas as a transition fuel when we think about the energy transition, or should we basically agree that it's going to be an ongoing component of electricity supply, power supply for the foreseeable future?
Takao Tsukui 9:10
Yeah, I think that's a great point that people are talking about every day. You recall, you know, a couple of years ago, fossil in general was just a no-go. You know, coal, of course, but also gas, was just fossil fuel period, and when the word decarbonization was the king, you know, gas turbines were treated as a transition technology. But today, we see right now in the market that it is the main technology to support this growth. But at the same time, having the options in the future to be able to be a decarbonized electricity, when the time comes and when the needs come, and when that affordability comes. So if I go into the gas turbine technology, combining with technologies like carbon capture, or combining with hydrogen blending, there is an optionality in the future. As you said, within the 30 years, we assume that time will come that we can be converting these assets together with such kind of technology. So it will not become a stranded asset.
Dan Bogler 10:25
Excellent. So tell us a little bit more because these are also areas where MHI is strong. It’s a world leader in CCUS, in carbon capture, utilization, and storage. Tell us how that combines with, you know, with a gas turbine or a power plant at a utility, for example. And tell us a little bit about hydrogen blending for turbines.
Takao Tsukui 10:50
Sure. So as you know, MHI is the only OEM that has both the gas turbine and the carbon capture technology, in-house. So we have a team here in Houston that does the carbon capture business in MHIA, and we are supporting the customers' needs and the study’s ongoing. And combining with the gas turbine, the gas turbines can be installed ahead, as it is ongoing today. And then later on, when the customer feels the right time and, of course, the budget and the needs, we will be adding on carbon capture technology behind the gas turbine to capture the CO₂. So that's the one solution that we are talking… we've recently announced a joint study with a very major utility in the US that we've been supplying many gas turbines, so that would be a great opportunity to really understand better when the right needs come. We also have several projects that are very close to closure, so when certain projects are closing, we will really better understand, you know, what the needs are and how the economics works. But also the hydrogen blending from green energy, and we have the storage system there. That is a full-capacity commercial project that can do hydrogen blending on-site. So this will be a very exciting project coming commercial this year, and we're really excited to see that.
Dan Bogler 12:30
So yeah, let's let's talk about that a little bit more. The focus has come off green hydrogen in the last couple of years, as you've hinted at, as people have focused on meeting power demand rather than decarbonizing that demand, but it is a long-term solution. So, as I understand it, MHI and indeed its competitors will be able to run their gas turbines 100% on green hydrogen in a few years' time, as long as there is enough green hydrogen available. But will there be enough of that, you know, carbon-free fuel?
Takao Tsukui 13:13
Well, that's a challenge for sure. Amount of J-Class carbon-free fuel is going to be massive, and currently we don't see demand.
Dan Bogler 13:24
The demand is going to be massive.
Takao Tsukui 13:26
Well, no, the amount of fuel necessary, for example, if we're going to run 100% hydrogen, you know, continuously, the amount of supply of that green hydrogen is going to be massive, way above what is currently planned or any projects that we see today. So that's the larger challenge than the technology development for 100% green hydrogen combustion, which of course today does not exist. But technically, you know, we have a roadmap to develop that when we see that the right timing comes. So for an OEM like MHI, it is very important that we have those technologies ready. That today, we've done 30% hydrogen blending, we've already proven that, demonstrated that. We've gone up to 50% also. We've shown that, and carbon capture — we've been doing this business for many years, we've done the largest power plant for carbon capture on a coal plant previously. So as an OEM, we want to be sure that we have those options ready when the time comes.
Dan Bogler 14:34
There's another string to your bow, and another source of fuel that people are increasingly talking about again, which is nuclear power. And there are, you know, there have been some agreements signed between some of the big hyperscalers like Microsoft, potentially revitalizing Three Mile Island. What is the role of nuclear in terms of powering data centers and electricity demand? You know, electricity supply in general, and tell us specifically a little bit about SMRs, you know, there's the smaller modular reactors that are being developed.
Takao Tsukui 15:12
Yeah, in this market in the US we are seeing very strong attention towards nuclear. Obviously, that's a strong option for some of the customers and developers for the path, for both decarbonized electricity and stable and reliable continuous power generation. So we are seeing that becoming more and more highlighted. Many developers for SMRs has raised billions of money between nuclear and gas — a certain balance, I would say. But in the coming decade, I would say, would be very difficult for nuclear to like take over a certain amount of the gas market, but eventually it's coming, and yeah, we see that in the US for sure.
Dan Bogler 16:02
Ultimately, you see them as having more complementary rather than competitive roles, so basically there will be a need for all of this.
Takao Tsukui 16:10
Absolutely, I think so. Yes.
Dan Bogler 16:12
Let's turn a little bit to the policy landscape in the US, because, you know, we've been talking about these different tax credits that were previously available under what was called the IRA. Which sources of energy do you see as more tax-incentivized and as more, you know, more able to develop, and that includes renewables as well?
Takao Tsukui 16:34
Sure, absolutely, and yeah, I think renewables were definitely impacted, solar and wind as a starting point, but overall, I think, you know, administration changes, policy changes, have some impacts. But at the end, the economic growth is much more majority to support the demand and you know supply and the market. So, so far, we haven't seen a huge impact to our business — you know, tariffs, the IBVA — these administration actions haven't really, you know, at least in a negative way, impacted our core businesses.
Dan Bogler 17:21
So you're saying really that the demand generated by the economic growth and by all of this, you know, AI boom — I guess potentially even AI bubble — is more important in terms of order patterns and demand?
Takao Tsukui 17:43
I think so and you know we've experienced this similar kind of situation, but not at all similar, in the year 2000, when a huge boom came on generation assets, and people started to utilize gas turbines much more over coal, and there was a huge boom. It was 100 gigawatt. It was the last 100 gigawatt demand year, in the year 2000, and this 2025 was the second time to beat 100 gigawatt. But fundamentally, it's so different because of this real demand coming from the AI, you know, boom. And the bubble word may not be the right word because a bubble eventually pops, and I think we all feel that right? I think everybody now uses AI in certain ways, not only in their computers, but you see that maybe in your car, or in your appliances, or, in many ways we all feel that AI is coming to our life, so this is the real growth and the necessity for electricity generation.
Dan Bogler 18:54
Thank you. That's a very good point. It is true that AI is creeping into our lives everywhere.
Takao Tsukui 19:02
Absolutely, I believe so.
Dan Bogler 19:04
This is a sustainable level of demand, at least, you know, with some small fluctuations, but basically sustainable. Tell us a little bit more about the change, you know, in the overall industry environment. We've touched on it with decarbonization, perhaps being a little bit less important these days, energy security being a little bit more important. Is that something that will potentially boost… How do you think about those things?
Takao Tsukui 19:40
Well, for sure, I think energy security has become a very major topic in the past several years. Just with within this two years, I would say, you know, energy security is more and more getting attention, and for that, many countries, even outside the US, Southeast Asia, or Middle East, or other countries are focusing how to be as much self-sustainable as possible in terms of these energy needs. So that is taking over the discussions of decarbonization, but not meaning that like decarbonization is totally gone. I think it's still agenda. It's still something that the global market needs to keep in their mind, but it's just a matter of priority today. One interesting plant that I recently saw was an enhanced geothermal system. This is also actually a site in Utah that we are supplying the geothermal turbines, we call it ORC turbines, that is generating today going to 100 megawatts, but going to expand to 500 megawatts. And this is a relatively new technology, not the conventional geothermal technology, and this was very, an eye-opener for me, that how much people seek to find new ways to be, of course, competitive, but at the same time, you know, generating reliable, stable, affordable electricity. And I think that there's some certain potential in this enhanced geothermal system. Also, MHI Group has a company called Turboden, based in Italy, a global company that is supplying these turbines. And I'm really looking forward to these kind of new approaches, that really encourages me that our company can do to society.
Dan Bogler 21:43
I'm glad you raised geothermal because we plan to tackle that topic in a future episode of this podcast. I'm also glad that I'm talking to a technology optimist, someone who still believes that technology can solve a lot of the issues we're dealing with. So, if you step back a little bit, Tsukui-san, you know, you're a global executive, you're based in Americas, but you're a global executive, you've got a global mindset. Do you see the US and the US’s energy policy and the developments you're observing there, particularly not only on the demand side, where it is clearly still leading the AI boom, but in terms of its policy environment, maybe currently the switch away from, you know, decarbonization as the top priority?
Takao Tsukui 22:40
Well, USA obviously has a huge impact. Some countries are connected by pipelines or grids between the countries, neighboring countries, and some countries are more isolated. So I think policies definitely have to be designed to fit each region, and maybe in the past decade we saw a little bit more influence to try to make a global standard, global rules that sometimes may not fit to certain areas, and that's where we have to really work together to make sure that we are designing and supporting each region by region. So how I pitch gas turbines in United States would be different of how I pitch it in Singapore, or in Malaysia, or in Middle East. You know, depending on that country's needs, we should find the right solution for those regions.
Dan Bogler 23:41
That makes a lot of sense. How do you feel personally about, you know, the ability — I just described you as an optimist — about the ability for technology and companies like MHI, an acknowledged technology leader in this area… how do you feel that, you know, the ability of technology to meet the future challenges that we face, both at the very basic level, the electricity demand, then beyond that, decarbonization, equality, you know, the energy trilemma of also being able to be affordable, as well as clean, as well as secure energy, supplying it that way… do you think technology can do that, or will we face insurmountable challenges?
Takao Tsukui 24:35
Well, as an optimist, I would say the technology combined with the right business model can definitely support the demands, the needs and the changes in the coming decades. I am very, very motivated every day to be in this industry, and being in the industry for over 30 years, one thing that I can clearly say is, you just never get bored. Because there's always changes, demands, you know, the industry changes. It's never a same business model that we've been facing over the three decades that I've been in, and that makes me so excited. And what MHI can provide, and to accept those challenges and apply to those differences or the changes that we have been working on in the past three decades. You know, when I started MHI, majority of our business was actually coal, coal plants, and you know, gas plants were a very small business in the company. And then we were dealing with all utilities, some government-owned utilities, in most of the regions. And then it moved towards like IPPs, you know, investor-owned or some investors doing power plants for the first time. And then, you know, you deal with these customers, which is very challenging because the demands on, for example, terms and conditions are different. And then, you know, again we're coming back to more of the utility era today, that understands our technology, knows well what we do on demonstration validation, and you know we get very well aligned with the people who understand what we do and the technologies that we have. So it's always been exciting to be in this industry, and I appreciate being part of that. And MHI has always been able to support what's needed from the market.
Dan Bogler 26:44
Thank you very much, Tsukui-san. Thank you for your time. Thank you for your insights. It was a pleasure to talk to you about all these issues. I also want to thank our listeners. We will be back with new episodes in due course. And in the meantime, if you're interested in these topics, please check out Spectra at mhi.com, where you'll find lots more information. Let's keep moving the world forward. Thank you very much.
Takao Tsukui 27:11
Thank you.
