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Publication Title | From CoPS to mass production? Capabilities and innovation in power generation equipment manufacturing

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Industrial and Corporate Change, Volume 14, Number 1, pp. 1–26 doi:10.1093/icc/dth042

Advance Access published January 10, 2005

From CoPS to mass production? Capabilities and innovation in power generation equipment manufacturing

Thomas Magnusson, Fredrik Tell and Jim Watson

This article presents a case study of small, distributed electrical power generators, representing a potential substitute for large power plants, and raises questions regarding the ability of established manufacturers to manage this kind of techno- logical transition. The analysis demonstrates that the step from experimental R&D to commercial production is particularly difficult for the incumbents. This observa- tion is explained by showing that whereas manufacturing of large power plants rests upon extensive systems integration capabilities, distributed generators are based on a ‘plug-and-play’ logic.

1. Introduction

Consider the following stylized choice for electric power generation based on natural gas. Representing a local electric utility, you are on the verge of installing 500 MW of new generating capacity. On the one hand you could choose the traditional alternative to invest in one single combined cycle gas turbine (CCGT) power plant and connect it to the centralized transmission and distribution network. On the other hand, you could choose the unorthodox alternative of buying 10 000 units of 50kW micro- turbine generators to be installed with the customers requiring the new capacity, an alternative that often is referred to as distributed generation. The CCGT is a high-cost, unit-produced and customized product; a so-called complex product system (CoPS) (Hobday, 1998). By contrast, the microturbine generator has a substantially lower unit cost; it is less complex, standardized, easy to install and designed for mass production.

Taken collectively, distributed generation could be highly disruptive for incumbent players in the electricity industry (Fleetwood, 2001). This is particularly the case for mini size generators which can be mass produced and installed in large numbers at household or community level. As we show in this article, the challenges implied by these generators will not only affect electric utilities, network operators and retailers. They also have wide-ranging implications for the companies that manufacture electric power generation equipment. These companies, well-known engineering firms such as General Electric, Siemens, Alstom and ABB, are the main subject of our analysis.

Industrial and Corporate Change, Vol 14, No 1 ©ICC Association 2005; all rights reserved

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