Specializing in the design, construction, operation and maintenance of waste-to-energy (WtE) plants, Mitsubishi Heavy Industries Environmental & Chemical Engineering (MHIEC) has hundreds of waste-to-energy facilities in Japan and overseas. In this interview, president Takayuki Hishinuma explains how MHIEC is embracing digital transformation and a greener future as it looks to expand its global reach.
Can you please briefly introduce yourself to our readers?
I have worked with Mitsubishi Heavy Industries (MHI) for 38 years. I first worked in the environmental systems division for about 20 years then I moved to transportation systems. Through my career, I worked on the Taiwan high-speed rail and the company also constructed the Dubai Metro and Doha Metro in the Middle East. Two years ago, I was appointed President and CEO of Mitsubishi Heavy Industries Environmental and Chemical Engineering Co.
Heavy industry companies seem to have a more traditional mindset. What advantages and changes did your international background bring to this traditional market?
Waste-to-Energy (WtE) is a very domestic business, with 95% of our company's business being in Japan. During my career, I have only worked overseas, while my Japanese experience is very limited and only makes up about six percent of my experience. The Japanese market is shrinking, so expanding our business overseas is very important. Also, we had difficulty with a project in Singapore called Tuas 6th, which is one of the biggest WtE plants with a design capacity of 4,200 tonnes per day by 4 units. The project is under a Public Private Partnership (PPP) structure. We invested equity in a special purpose company (SPC) and are now carrying out the operation & maintenance (O&M) works for the project. Unfortunately, our local partner went into liquidation. Initially, our role in the project in Singapore should have been main component supply, rather than Engineering, Procurement and Construction (EPC), which was done by a subsidiary company of the local partner. However, because they went into liquidation, we had to take over their job as an EPC contractor, which was a big challenge for us.
COVID-19 was in an early stage of spreading when I joined the company. At that time, the final stage of construction was beginning, but I could not enter Singapore because of their restriction policy. I have never met our engineers and supervisors working there, I felt online communication was not enough in some situations.
The requirements and market trends for the WtE sector are constantly changing. In fact, we are required to provide the best services for not only EPC work but also running a SPC and O&M. I believe that we can optimize the project and provide the best solution based on our experience of the Tuas 6th Project and having to overcome its challenges caused by partner liquidation and COVID-19.
Japan is in a complicated situation because of its demographic decline. It is the oldest society in the world and it has been losing about a million people annually over the last five years. This presents two big challenges: first is a labor crisis. It is harder to recruit young graduates and for experienced engineers to pass on their knowledge and expertise. Second is the shrinking of the domestic market. Fewer people mean fewer consumers and projects. What challenges and opportunities has Japan's demographic situation created for your company?
The waste volume is directly related to the population. If the population decreases, waste decreases too. Japan's population is rapidly decreasing, which is a challenge for our business. This means that the number of WtE plants will also decrease in the future. There is also the low birth ratio and an aging population, as a third of the population is over the age of 65. Along with constructing WtE plants, we also do O&M work which requires human resources. Sometimes working at a WtE plant requires people to enter into areas of waste stock, this is one of sectors that job applicants do not tend to think of as their first option.
It is not easy to recruit people. Since the number of veteran and skilled engineers in our company is decreasing, we need to think about implementing digital technologies, such as remote monitoring and autonomous operation. We used it during the pandemic when it was a challenge for us to go to Singapore. We could not send a sufficient number of our engineers and supervisors there, nor could they come home for almost two years. At the time, we were constructing a Chinese plant next door to Wuhan. We could not do staff rotations that were usually required for the construction, commissioning and performance test phases. We had to optimize digital technologies and could pass the performance test completely.
We will be able to find solutions for Japan's demographic situation with our digital technologies, and through the lessons we learned from during the early stages of the pandemic.
Japan is well known for automation, but it is also slow to adopt digital technologies. In partnership with Yokohama city, you have developed a visualization system that analyzes plant data using AI technologies. The aim is to have a stable plant operation specifically with your Tsuzuki WtE plant. Can you explain this system in detail and how you are utilizing digital technologies in your business?
Personally, I focus on digital technologies. Digital transformation (DX) technology is regarded as very important in Japan, but it is hard to implement. My non-Japanese friend living in Japan said that Japanese people talk about digitalization technology being very important, however most management people seem to struggle to have a clear vision on it. He said that he found several functions that should be updated from his point of view when he was involved in an airport business in Japan. For the business, he first tried to find Japanese ICT technicians, but no candidate satisfied him, resulting in him going overseas, eventually narrowing his shortlist down to European, Korean and Chinese technicians. He finally selected an European engineer. He told me that if I am keen on digitalization, I should choose international engineers from these areas.
My focus is digitalization, so the joint development with Yokohama city is very important for my company , which we began four years ago. The feature digitalization technology we apply to the project is “MaiDASⓇ” (MHIEC AI Ir-sensing and lot powered data analysis). The detail for the application to the Tsuzuki project is a report on our regular technical issue “Mitsubishi Heavy Industries, Technical Review Vol. 57 No. 2 (June 2020)”. Periodically, I request progress reports, with this year's goal being to upgrade our systems before having autonomous operations.
We would like to develop digital technologies which are most suitable and highly efficient for WtE plants by utilizing know-how and knowledge of overseas technicians who understand practically what digital is.
If we come back in ten years to do another interview, how do you think digital technologies will change your business? What evolution in your business would you like to see?
I believe autonomous operation through digital technology should be ordinary, as it covers a lack of operators and difficulty in passing on technical traditions from skilled veterans to new workers.
Right now, we are operating and maintaining Japanese WtE plants and the local government is trying to privatize this business. We are operating and maintaining about 13 plants in Japan and Singapore.
Because of Japan's mountainous topography, incineration is the preferred waste disposal method compared to landfills. 78% of Japan's waste is burned and the heat produced is used for power generation, however the resulting carbon emissions and toxic air pollutants have put the incineration technique under question. The former Suga administration stated that Japan needs to become carbon neutral by 2050. How do your technologies reduce toxic carbon emissions?
Former prime minister, Mr. Suga stated that in 2050, carbon neutrality must be achieved. WtE plants need to produce power. The MHI Group power generation technologies are number one in Japan and highly competitive worldwide. Our strength is in utilizing these technologies. Originally, waste incineration technology was derived from power generation, which is similar to coal-fired power stations. We focus on increasing power generation from waste. Efficient power generation requires high-temperatures and high-pressure boilers. It is not easy because waste energy's crude gas is very different from the normal coal fire – waste energy’s crude gas is more hazardous and the boiler tube melts and erodes at higher temperatures. We are developing technologies to solve this challenge. We are pursuing higher temperature and pressure to achieve higher efficiency of power generation. Our technology is called an exhaust gas recirculation (EGR) system. All exhaust gas has low oxygen content and we can reduce harmful nitrogen oxides (NOx). Flue gas can also be recycled and reduced. This is a very important technology.
One of the technologies we are interested in is your electrochlorination system. Can you tell us more about it?
This can be used with the water intake of power stations or desalination plants and so on. The electrochlorination system produces sodium hypochlorite, which removes marine life, like seaweed and shellfish, sticking in the water intake pipes offshore in order to avoid pressure loss caused by marine life buildup. This technology is the electric decomposition of ions, which is very interesting because the byproduct of this system is hydrogen. In the future though, I hope that this technology can be used for other applications.
Mitsubishi Heavy Industries Environmental & Chemical Engineering (MHIEC) is part of a very diverse ecosystem that is the MHI group. This puts you in a very interesting position to leverage on the expertise of other group company members. How have the other members of the MHI group benefited you?
Among the MHI Group companies, MHI Engineering has a carbon capture technology and digitalization development. We have announced that we will demonstrate CO2 recovery in the Tsurumi WtE plant in Yokohama city and the captured CO2 will be sent to a member of the project, one of the biggest gas utility companies in Japan. They will convert the CO2 to methane through methanation. Methane gas composition is similar to other gases normally used. We have synergy with MHI Engineering with their carbon capture technology and MHI with their power generation technologies. We are also using MHI Power Systems' distribution control system (DCS). There are technologies from other group companies that we can utilize and integrate into our systems. We are system integrators.
MHI Group's Research and Development Center, which has a variety of and enormous element technologies, is the strongest point for our business.
MHI is in a market that is facing stiff price competition from China, but in complex industrial sectors such as creating WtE plants or making industrial boilers, Japanese companies still maintain large market shares and technical expertise in the global market. What do you think is the reason for this?
We have supplied our WtE plant equipment to more than 20 plants in China. Sanitation is very important so they thought that garbage should be incinerated, which created our market in China. China is changing very rapidly. When they built a high-speed rail from Beijing to Shanghai, a length of 1100 km, I was very surprised they did it in four years. The Shinkansen from Tokyo to Fukuoka was gradually built in 11 years.
Japanese companies' strategy is not to compete with Chinese companies on the same stage. If we do the same things, we will not be able to win the price battle. In Singapore, we do EPC because there are opportunities to avoid competition with Chinese companies. We can compete with other Singaporean or foreign companies, and Taiwan was the same 20 years ago. In the Chinese market, we are now supplying mainly equipment and engineering, but in the future, we will be able to have licensed partners. We have a different business strategy in each market and each country. Our business strategy for the Chinese market is to work with local companies.
I think Japanese companies have reliable technologies with high quality and performance to meet customer needs, which are better than the stiff prices offered by Chinese competitors.
With Covid-19, there are tougher border health control and quarantine measures, especially in China with its zero-Covid policy. It is delaying shipment and making staff rotation impossible. We see many companies divesting out of China or localizing their supply chain in order not to be dependent on imports. What has been the impact of Covid on your business? What solutions have you found to stop the supply chain disruptions?
We had difficulties with supply chain management. Before the pandemic, we had already ordered main components and steel structures from overseas suppliers. Even if they could manufacture the products, we had problems with shipping and quality control. If we order from foreign companies, we need to check the quality from time to time. Last year, we could not send quality assurance engineers overseas, so we did remote checking. Unfortunately, it was not easy. It is difficult to execute the quality control effectively remotely at this stage, we have some challenges to solve. During the pandemic, our business was not hugely impacted because waste management is an essential job. The plant is an essential piece of infrastructure.
You have constructed more than 30 WtE facilities overseas, mainly in Asian countries such as China and Singapore. You have also established an overseas Group Company in Beijing, China. What other countries are you looking to expand into? What strategies will you employ to go to the Middle East?
I am looking to expand into the Middle East. I have been working there since 2003 and I am used to their working style. In Singapore, we have constructed the Tuas 6th plant on an EPC basis and we are now operating and maintaining it. This is our plant, which is realized under a public-private partnership (PPP) project. We own, operate and maintain the plant. This type of scheme seems suitable to Middle Eastern countries. They possess enough to take on the scheme, but sometimes I thought we should deepen and share the idea about what is the reality of PPPs. To be successful in PPP projects, contractors generally need to have security. If a plant becomes unnecessary five years later, we will not be able to recover anything. There may be long term risks arising from unpredictable adverse changes in society or an environment in a country that are totally beyond your control. With some kind of long-term securities that cover such contractors’ risks, you feel more comfortable to go into PPP projects there.
We interviewed Asahi Yukizai, a maker of plastic valves. They also expressed their desire to expand in the Middle East. One of the big problems they had was that Middle Eastern people did not believe that plastic valves worked as well as steel and they had to conduct client education. Do you feel the same need to educate local partners that you have with regulations and product management?
It is a security package. For example, tipping fees must be paid. In the Middle East, we need government support to provide required services. In most countries, if we achieve some capacity of the plant, we can have some capacity payment. If waste cannot be sent to the plant, we cannot access funds and this can be a problem. Capacity payment is, however, secured in general cases and the power market is established. Scrap metal can also be sold. We can do so because of their established social system. I am still very curious about the Middle East whether it can be done there or not.
If we come back on the last day of your presidency, what goals and dreams would you like to have achieved by then?
Our company's presidential policy is the realization of sustainably developing the company. Some presidents might squeeze employees and reduce even essential costs and salaries. I do not like that because it is not sustainable. It is important that all employees are happy to have sustainability. My ambition is to have employees who feel happy and proud to be working with our company. Although it will not be easy, we would also like to aim at being number one in the field.