Speaker 1: Welcome to zero. I am Akshatrati this week the world's
Speaker 1: biggest machine. I often think as a reporter that you know,
Speaker 1: when you think about fossil fuels, people kind of know
Speaker 1: what coal looks like, what oil looks like, you know
Speaker 1: what gas burns like. But electricity is something that people
Speaker 1: don't have a very intuitive grasp on. Yes it comes
Speaker 1: out of a plug, and yes it powers a lot
Speaker 1: of our lives now, But how does it move? How
Speaker 1: do you make it move? How do you manage its movement?
Speaker 1: It is a mysterious form of energy even today, even
Speaker 1: though we've been using it at scale for one hundred
Speaker 1: plus years. I'm just curious.
Speaker 2: Yeah, yeah, I was moved. That was poetic. I think.
Speaker 2: I think you're exactly right. And this is part of
Speaker 2: what drew me to this sector to begin with. It's everywhere,
Speaker 2: all at once, and not to be seen at the
Speaker 2: same time. There's like often it now.
Speaker 1: I don't believe in God, and I'm trying to understand
Speaker 1: why I launched him to a sermon with this week's guest.
Speaker 1: I think it's because I'm obsessed with electricity these days,
Speaker 1: in all its mysterious beauty, and for the next three episodes,
Speaker 1: we are going to bring you conversations about the machine
Speaker 1: that brings you electricity, the world's biggest machine, the grid.
Speaker 1: This week we talked to Sunjit Sanghera, who you just
Speaker 1: heard from. He is now the head of Strategic Futures
Speaker 1: at the National Grid, but I caught up with him
Speaker 1: in his last days at Bloomberg ne EF, where he
Speaker 1: was an expert on grids. Sunjeet is an electrical engineer
Speaker 1: and someone who worked in grid control rooms, and who
Speaker 1: better to help us understand this beast of a machine
Speaker 1: that needs to get bigger and more complex as we
Speaker 1: get to zero emissions. Sanji, Welcome to.
Speaker 2: The show, Hi Action, Thanks for having me.
Speaker 1: Now, when we talk about grids, people probably think of
Speaker 1: big cables and pylons. That's the visual side of grids
Speaker 1: that I think people are aware of. But grids are
Speaker 1: a lot more than just those pylons and cables. What
Speaker 1: are quote unquote invisible parts of the grid.
Speaker 2: Yeah. When I picture the grids, I picture driving on
Speaker 2: a long road trip in Canada. On the side of
Speaker 2: the highway, you'd see these power lines stringing across the countryside,
Speaker 2: and I remember thinking like, we can't possibly be connecting
Speaker 2: everything together with these That is exactly what we're doing,
Speaker 2: is we're connecting everything together with these wires. So I
Speaker 2: think networks really are important, and it may seem a
Speaker 2: bit old school or kind of a legacy thing that
Speaker 2: we're gonna you know, we have aluminum and copper wires
Speaker 2: taking power from where it's being produced ultimately where it's
Speaker 2: being consumed. But like, networks underpin a lot of the
Speaker 2: way that the world works, and it also underpins a
Speaker 2: lot of the transformations that we've had in the world.
Speaker 2: So if we look at like roads or railroads or
Speaker 2: even the internet, there's there's always a network sitting at
Speaker 2: the center. And so in the energy space there are
Speaker 2: networks too, and we have really two segments of networks.
Speaker 2: So we have the transmission grid and the distribution grid,
Speaker 2: and there's a semi arbitrary distinction between them. There's a
Speaker 2: really like technical term of like voltage that distinguishes them.
Speaker 2: But really one is the highway system that moves power
Speaker 2: really far distances, and one is this kind of distribution
Speaker 2: grid that moves power more within communities, and it's a
Speaker 2: crucial part of taking and energy where it ultimately needs
Speaker 2: to be could we get away without a grid? And
Speaker 2: this has been contemplated more so now that we have
Speaker 2: these kind of rooftop photovoltake systems. You can put power
Speaker 2: right on your home and to some extent we can
Speaker 2: get rid of the grid. And this was the fantasy
Speaker 2: that we thought we can maybe partaken, that we maybe
Speaker 2: retire the grid entirely as renewables proliferate. Largely, what we've
Speaker 2: seen is this doesn't happen, so that the markets that
Speaker 2: have gone the furthest in renewable adoption have had to
Speaker 2: actually double down on this infrastructure. So if you look
Speaker 2: at say, for example, Germany, where they have a lot
Speaker 2: of wind energy, you have these highly remote renewable energy
Speaker 2: and you have to pump it into where the cities are.
Speaker 2: Even in cities where you have a lot of solar,
Speaker 2: you end up needing substantial infrastructure to backstop when the
Speaker 2: sun is shining and distribute power. The function of this
Speaker 2: grid has evolved, i would say, from moving power from
Speaker 2: where it's produced to consume to being a bit more
Speaker 2: point to point, kind of more like the internet. But
Speaker 2: this has kind of been an evolution that we've been on.
Speaker 1: And one thing we didn't talk about is the manpower
Speaker 1: the people that are monitoring these substations, maybe trees falling
Speaker 1: on cables. And you mentioned that you worked in a
Speaker 1: control room. What does that work like.
Speaker 2: So the people are actually a crucial part of the
Speaker 2: grid system and they are largely invisible as well. And
Speaker 2: so this is the people who are maintaining these infrastructures
Speaker 2: while so literally climbing the poles and doing maintenance and
Speaker 2: then they're working in the control centers while and they
Speaker 2: play a crucial role making sure the system is operated
Speaker 2: effectively and efficiently. Often have decades of experience doing this
Speaker 2: for a specific market. People are retiring and that expertise
Speaker 2: is leaving. Meanwhile, the challenge of operating the grid is rising,
Speaker 2: and so the workforce challenges here are significant. Even in
Speaker 2: building out the grid, there's a number of skill sets
Speaker 2: around cable splicing, protection control technologists. These are very skilled
Speaker 2: jobs that take a long time to be able to
Speaker 2: acquire the skills for and then we have retirements there.
Speaker 2: When I worked at Utility, there was a particular job
Speaker 2: where you had to shadow under a specialist engineer for
Speaker 2: a decade to be qualified.
Speaker 1: To decade shadowing for a decade.
Speaker 2: Yeah, so it was running these detailed EMTP, these kind
Speaker 2: of transient stability studies, so very technical engineering studies, and
Speaker 2: the complexity of the grid when we talk about it rising,
Speaker 2: this is part of it because the type of things
Speaker 2: that we're connecting are very nonlinear in the way they
Speaker 2: behave And so what does this mean? I think, yes,
Speaker 2: we're going to need people, and people are often the
Speaker 2: center of any transition, and skilled labor will be very
Speaker 2: crucial part of this.
Speaker 1: And there are obviously these two types of grids, the
Speaker 1: transmission grid and the distribution grid, and you said voltage
Speaker 1: is that thing that separates them. And then there are
Speaker 1: perhaps things that people do see, these things called substations
Speaker 1: where these two types of grids are connected, they sort
Speaker 1: of change the voltage. But are there other things that
Speaker 1: you know, either people should be aware of or they
Speaker 1: probably walk by and they don't think about, but are
Speaker 1: also key parts of the grid.
Speaker 2: Yeah, so substations are like the nodes, like where these
Speaker 2: power lines meet. I think the other key attribute is
Speaker 2: there's a whole layer of digital infrastructure that sits and
Speaker 2: monitors the grid and make sure that when something bad happens,
Speaker 2: and so in the grid space of something bad is
Speaker 2: like a branch falling on top of a power line,
Speaker 2: which seems like a mundane thing, but it's a very
Speaker 2: significant thing and it happens all the time, and so
Speaker 2: it needs to be managed. And so there's a layer
Speaker 2: of telecommunication infrastructure that is becoming just as important and
Speaker 2: even more invisible than the power lines themselves, because the
Speaker 2: grid is becoming bidirectional and reliabilities is the top of
Speaker 2: mind as we see the storms and being hammering these
Speaker 2: infrastructure more and more. This is largely linear infrastructure sitting
Speaker 2: highly exposed to the elements, right, and so the digital
Speaker 2: infrastructure is just as important. And maybe the last bit
Speaker 2: I would say that's quite invisible is the control center.
Speaker 2: So this is the heart of a power grid. So
Speaker 2: it's a building usually off in some remote area, and
Speaker 2: you know it's like you usually just have windows, like
Speaker 2: it's kind of a boring building. But this is where
Speaker 2: all of the telecommunication comes back to and decisions are
Speaker 2: being made hour to hour, minute to minute, second to
Speaker 2: second about what should happen on the power system. And
Speaker 2: the role that that control center is having to play
Speaker 2: is changing rapidly as the number of decision points right,
Speaker 2: So if you have you can imagine a power system
Speaker 2: with ten generating coal plants in the old legacy days
Speaker 2: now being tens of thousands of individual operating points. So
Speaker 2: the role of the control center has radically changed. And
Speaker 2: this is just an invisible building in the middle.
Speaker 1: Of nowhere, and are obviously changing as technology changes, And
Speaker 1: regardless of whether we had climate goals or not, there
Speaker 1: would be things that we'll be done to the grid,
Speaker 1: either by external forces or within the industry to change it.
Speaker 1: But let's focus on the climate goals. Because BLOOMERGINIF has
Speaker 1: put out its latest energy outlook and then some of
Speaker 1: the numbers in there are stunning. The world will need
Speaker 1: to nearly double its grid network to one hundred and
Speaker 1: eleven million kilometers. That's a distance that's almost three quarters
Speaker 1: to the Sun, and we have to do that by
Speaker 1: twenty fifty. Now, the first grid was built in eighteen
Speaker 1: eighty two in Manhattan in New York, and so for
Speaker 1: net zero, we have to build as much in twenty
Speaker 1: five years as we have done in the previous one
Speaker 1: hundred and forty years. That seems like a crazy challenge
Speaker 1: to me, but for some reason it feels like the
Speaker 1: grid challenge is underappreciated.
Speaker 2: Yeah, I agree, the challenge is significant. I think we've
Speaker 2: just started to wake up to this challenge building wind
Speaker 2: and solar and electrification. Like, this kind of narrative on
Speaker 2: reaching our climate goals has been talked about for some time.
Speaker 2: It's fairly well established. The power grid is kind of
Speaker 2: this neutral agent, right, because you can use it to
Speaker 2: move electrons from a coal plant or from a wind farm,
Speaker 2: and so as a result, it was a bit more
Speaker 2: muddied in the conversation about what its role actually was.
Speaker 2: And again, like as I was saying before, there was
Speaker 2: this kind of perception that maybe the grid wasn't necessary,
Speaker 2: and that hasn't really borne out. What we're seeing is
Speaker 2: that the network is going to be crucial and we
Speaker 2: will have to build it out. Utilities have woken up,
Speaker 2: governments have woken up. We're seeing this across Europe, the
Speaker 2: US even right, and have started to really focus in
Speaker 2: on this problem of building out the electricity. If you
Speaker 2: look at historically the amount of linear infrastructure we're adding
Speaker 2: to a power grid, you know, we had years where
Speaker 2: it's less than one percent per year growth rates because
Speaker 2: largely what would happen is you'd build out the grid
Speaker 2: and then you maintain the assets. You'd kind of go
Speaker 2: into this care and maintenance era where the grid has
Speaker 2: been built out for the size of the economy that
Speaker 2: we have and we would mostly just take care of it.
Speaker 2: But prior to that was a huge build cycle in
Speaker 2: much of Europe right in the US, and you would
Speaker 2: see these significant outlays of infrastructure happening in short time
Speaker 2: frames where there was political window, the construction resources were rallied,
Speaker 2: and things just got done. So what we're talking about
Speaker 2: here is just a return to that. I don't think
Speaker 2: it's fair to say it's anything more than something that's
Speaker 2: been done before. I think the challenge is many markets
Speaker 2: are doing it simultaneously, right, and that's because there is
Speaker 2: a global nature to why we're all building out the
Speaker 2: grid as opposed to an economic growth cycle that each
Speaker 2: country was doing at a slightly different time. That's going
Speaker 2: to put a constraint on resources, both people and parts
Speaker 2: and metals, and so that's that's a unique challenge. But
Speaker 2: in terms of coming back to what we have to
Speaker 2: do with building a grid, it's something we've done before
Speaker 2: and it's something we need.
Speaker 1: To come back to and we'll look at the regional picture,
Speaker 1: but let's stick with the global figures because the other
Speaker 1: thing about grids is that it will take a lot
Speaker 1: of money. The BNF report said, if we are to
Speaker 1: build a net zero grid, it's going to cost almost
Speaker 1: twenty three trillion dollars by twenty fifty, and that is
Speaker 1: two thirds of the amount that would be spent on
Speaker 1: building out renewables, which again I feel like is not
Speaker 1: appreciated by most people who think about net zero goals.
Speaker 1: And so what specifically about a net zero grid makes
Speaker 1: it more expensive than what would have been a baseline scenario.
Speaker 2: Mostly it's just more, there's more of it needed, the
Speaker 2: amount of renewables, the amount of induist street that you
Speaker 2: actually have to put onto the electricity grid, electrification and
Speaker 2: the buildout of zero carbon power generation is what the
Speaker 2: net zero scenario is effectively doing. So the size of
Speaker 2: this system becomes quite large, and so there's a large
Speaker 2: part of today's economy is not on the electricity grid,
Speaker 2: whether it's you can look at your home, for example,
Speaker 2: your car may not be on the grid, your heating
Speaker 2: may not be on the grid, but yes you're lighting
Speaker 2: and your power use will otherwise be on the grid.
Speaker 2: So that's a third right, and so when you look
Speaker 2: at the size of the grid that has to now
Speaker 2: decarbonize this it's a significant challenge.
Speaker 1: And when we talk about the cost of reaching net
Speaker 1: zero they are significant. Who pays for that twenty three
Speaker 1: trillion dollars rate pairs?
Speaker 2: You know, so the average person is on the hook
Speaker 2: for most of this. That counterfactual I think is actually
Speaker 2: crucial just to dwell on that if you don't build
Speaker 2: the grid, there are going to be costs outside of that.
Speaker 2: So when you look at studies that look at what
Speaker 2: grid development does, it brings value to everyone, right, so
Speaker 2: it'll bring down the cost of the whole system. And
Speaker 2: this is part of why this is so challenging to
Speaker 2: put into context, is because system costs analysis is just
Speaker 2: a complicated thing to do to understand what's the benefit.
Speaker 2: We're talking about tying everything together, and so we've done
Speaker 2: some analysis at B ANDEF to think about what the
Speaker 2: impact to rates could be that first, so that like
Speaker 2: the spin cycle out to twenty fifteen is actually double peaked, right,
Speaker 2: so there's a big rise and spend out to twenty thirty,
Speaker 2: we think it tapers off that tapering off is more
Speaker 2: heavy in Europe than it is in other markets, and
Speaker 2: it's less pronounced even more in Asia. And then it
Speaker 2: picks up to an even higher peak out towards twenty
Speaker 2: forty and then tapers off again. So you have these
Speaker 2: two distinct spend cycles that happen. That first one, especially
Speaker 2: in Europe, happens when there isn't that much electrified load yet,
Speaker 2: because the electrification is a gradual thing that's happening out
Speaker 2: to twenty fifty. So that first spend profile is really
Speaker 2: dictated by building out this clean generation fleet, and so
Speaker 2: there's a huge appital expenditure and there's not as many
Speaker 2: rate pairs to pay against this capital expenditure, so that
Speaker 2: first spend profile is going to be particularly punishing on
Speaker 2: rate pairs. And that second cycle, which even though it's higher,
Speaker 2: we think is going to be a bit of a
Speaker 2: softer spec because there's just more consumers to distribute it over.
Speaker 1: After the break, we'll talk about grids around the world
Speaker 1: and their oddities. Stick with us and take a moment
Speaker 1: to rate and review the show on Apple Podcasts and Spotify.
Speaker 1: That will help others find it. And so now let's
Speaker 1: look at regional challenges because updating grids is being approached
Speaker 1: differently in different parts of the world because the existing
Speaker 1: grid infrastructure is in different stages of development. In the
Speaker 1: US and Europe, you said, the grids are a older
Speaker 1: but also haven't seen that much demand and electricity consumption
Speaker 1: in recent years, whereas in places like India and China
Speaker 1: grids are newer, but also they have been seeing rapid
Speaker 1: rise in electricity consumption. So let's start with the US.
Speaker 1: In the twenty first century, demand has only grown between
Speaker 1: one percent and two percent. That's now starting to change
Speaker 1: with electric cars, with data centers driving AI, as we've
Speaker 1: discussed on the podcast in previous episodes. So how exactly
Speaker 1: is the US addressing this challenge.
Speaker 2: So the US is particularly interesting because they've taken a
Speaker 2: bit of a sharp turn. I would say this year
Speaker 2: the Inflation Reduction Act in the US was lotted with
Speaker 2: a lot of fanfare, but one of the missing pieces
Speaker 2: there was thinking about the electricity grid, the transmission and
Speaker 2: distribution system in any meaningful way. But now we've seen
Speaker 2: a number of measures move forward for Order nineteen twenty
Speaker 2: in particular, are starting to address these issues with building
Speaker 2: up the grid. So in the US, you have a
Speaker 2: fairly piecemeal transmission grid, so you have regional grids that
Speaker 2: are fairly robust, but movement of power between regions has
Speaker 2: been very constrained. And you have three distinct power systems
Speaker 2: in the US, the Western Grid, the Eastern Grid, and
Speaker 2: the Texas Grid that have very very low connections between them.
Speaker 2: But that's not even the entire story. Within those regions,
Speaker 2: there's some pockets that haven't connected well within each other.
Speaker 2: This is starting to turn. They've started to go back
Speaker 2: to I would say, kind of back to basics, honestly, right,
Speaker 2: So long term planning, so instead of doing three to
Speaker 2: five years, you're looking out to twenty years. Now some
Speaker 2: places we're already doing this, but long term planning is
Speaker 2: the underpinning of making good decisions because you then know
Speaker 2: does this project help me today or does it also
Speaker 2: the building block of a much larger project down the
Speaker 2: road if all these other things happen. They're also starting
Speaker 2: to look at other technologies other than building transmission lines.
Speaker 2: There's a portfolio of technologies out there called grid enhancing technologies,
Speaker 2: and that can avoid building a transmission line and often
Speaker 2: is complementary to building a transmission line utilities are very
Speaker 2: risk averse and they've had a hard time moving forward
Speaker 2: with these projects out of pilot stage into more commercial
Speaker 2: scale deployments. In our modeling, this stuff is crucial, right,
Speaker 2: we need more of it. Most of the business cases
Speaker 2: for these types of technologies is a slam dung, honestly.
Speaker 1: So I wanted to talk about other regions, but let's
Speaker 1: stick with the grid enhancing technologies because I'm curious about them.
Speaker 1: I know of some of them. For example, there's a
Speaker 1: startup called ts Conductor which wants to replace that type
Speaker 1: of cable that exists and that will allow you to
Speaker 1: carry more power through the same connections than you used
Speaker 1: to be able to do in the past. What other types
Speaker 1: of grid enhancing technologies are there, Yeah.
Speaker 2: So that's a great one. Advanced conductors allows you to
Speaker 2: just move more power through an existing transmission line. Often
Speaker 2: you don't have to change the towers. You just change
Speaker 2: out the wire and you can get more capacity, which
Speaker 2: means that you don't need to expand the footprint of
Speaker 2: the corridor at all. Another one is dynamic line ratings,
Speaker 2: and this is really just about transmission line often has
Speaker 2: a static rating, meaning that this transmission line is one
Speaker 2: hundred megawatts, it's one hundred megawats all year round. With
Speaker 2: dynamic line ratings, you are able to change the rating
Speaker 2: of the transmission line hour to hour. And the reality
Speaker 2: is that the rating of a transmission line does vary
Speaker 2: because it varies based on weather for the most part,
Speaker 2: where the sun is in the sky, how much wind.
Speaker 2: There is a bunch of environmental variables, and if you
Speaker 2: know them, you can actually push more power through these lines.
Speaker 1: So in winter you could have a higher rating, and
Speaker 1: in summer you could have a lower rating.
Speaker 2: Absolutely yeah, And it can be quite notable, like thirty
Speaker 2: percent differences between wow yeah. And so if you can
Speaker 2: exploit this, then you can make better use of it.
Speaker 2: Beyond that, like batteries have a role to play, and
Speaker 2: inside flexibility is a portfolio of technologies where we talk
Speaker 2: about like a smart charging of electric vehicles. But you
Speaker 2: can do this in a way if you have the
Speaker 2: situational knowledge of what's going on on a power system,
Speaker 2: you can tactically change consumption so that you don't create constraints,
Speaker 2: and you might even mitigate constraints that would happen for
Speaker 2: other reasons by ramping up charging at specific times, and
Speaker 2: so there's a lot of opportunity there. I think, in fact,
Speaker 2: the single largest value that digitalization of the power system
Speaker 2: will provide is through the provision of flexibility on the system,
Speaker 2: rather than what we've seen so far, which has really
Speaker 2: just been incremental efficiency gains.
Speaker 1: Yeah. I mean, and this reminds me of the conversation
Speaker 1: we had about AI and the grids, because what you're
Speaker 1: describing is the number of decisions that will need to
Speaker 1: be made grow. The conclusion that Priodante came to was
Speaker 1: there is just no way that future grids can operate
Speaker 1: well enough without AI. Thing AI can help reduce the
Speaker 1: cost of managing those grades a lot.
Speaker 2: Interesting statement, Yeah, I think so. I used to work
Speaker 2: in a control room, and I think there'll be some
Speaker 2: hesitation to introducing algorithms that we don't know the outcomes
Speaker 2: of into a system where you have hospitals connected, airports connected,
Speaker 2: and so the reliability and the security of the system
Speaker 2: is the thing that we hold the most paramount in
Speaker 2: a control center. I think you're right. I think that
Speaker 2: the complexity of the task is rising, and they're already
Speaker 2: seeing this in the control room with having to increase
Speaker 2: staff and so at some point you're going to have
Speaker 2: to make a decision around do we simplify the complexity
Speaker 2: and as a result we might have certain optimization and
Speaker 2: efficiency gains lost that we just don't realize, or do
Speaker 2: we introduce more complex algorithms. But I think there's a
Speaker 2: real risk around having algorithms where we don't have known outcomes,
Speaker 2: rather than more deterministic algorithms which are already in control
Speaker 2: rooms and quite complex. And so I think there's a
Speaker 2: trade off to be made here. I'm not sure, and
Speaker 2: it's possible that different markets will land at different places.
Speaker 2: We'll get to see this play.
Speaker 1: Out a bit. And so going back to the regional
Speaker 1: spread in Europe is the same situation like the US
Speaker 1: to some extent that demand wasn't growing very much, but
Speaker 1: now it's starting to grow, except Europe is a lot
Speaker 1: more interconnected despite having a lot more nation states, and
Speaker 1: so are there challenges for Europe that are different from
Speaker 1: the ones that are there in the US.
Speaker 2: So I would say the European grid is further along.
Speaker 2: In Europe they are building systems, and up until recently,
Speaker 2: the US was still building projects and that's part of
Speaker 2: why they've ended up in this kind of piecemeal grid
Speaker 2: system in the US, whereas the European continental grid system
Speaker 2: is this bohemoth system that's very meshed together. They have
Speaker 2: targets set for how much inter connection between countries needs
Speaker 2: to be delivered, and they move along these targets quite quickly,
Speaker 2: and so they are building a coherent system. This demand
Speaker 2: growth narrative isn't as prominent in Europe as it is
Speaker 2: in the US. In the US we hear about it
Speaker 2: a lot, and as a result, I don't think they're
Speaker 2: concerned about the financing question of the grid because they
Speaker 2: see this load growth really kind of early on, whereas
Speaker 2: in Europe the load growth is more of a later
Speaker 2: stage thing. And it seems this way and as a result,
Speaker 2: the financing question of who will pay for this and
Speaker 2: the raid impacts of the transition are more prominent feature
Speaker 2: in Europe rather than the US.
Speaker 1: And what about China, where the deployment of renewables is
Speaker 1: just stunning, Right, So China last year built as much
Speaker 1: solar as the rest of the world combined, or China
Speaker 1: built as much solar in one year as the US
Speaker 1: has done in its history. And China is also known
Speaker 1: to have done a lot on the grid through its
Speaker 1: State Grid Company, which is fully state owned. It has
Speaker 1: been building some of the largest high voltage DC cables
Speaker 1: that carry renewables from the rest of the country to
Speaker 1: the east where the population is. And so China knows
Speaker 1: how to build, and it's building in an era where
Speaker 1: electricity demand is rising. But are there challenges that China
Speaker 1: faces that we don't appreciate.
Speaker 2: So I would say that China does have a bit
Speaker 2: of an easier task. Yeah, I like this grid infrastructure
Speaker 2: buildout is easier when you have a centralized system set up,
Speaker 2: and they've built out a grid system that is truly impressive.
Speaker 2: So when we talk about these voltages on the grid,
Speaker 2: we talk about high voltage, which is the start of
Speaker 2: the transmission grid. Higher than that we have something called
Speaker 2: extra high voltage. And then even higher still is something
Speaker 2: called ultra high voltage. These are technical terms. You can
Speaker 2: find them in scholarly publications. And so ultra high voltage
Speaker 2: is a grid system there's not that much of but
Speaker 2: if you go to China, there's an entire ultra high
Speaker 2: voltage backbone that covers most of the grid system there.
Speaker 1: And what voltage is are we talking in these three steps.
Speaker 2: So this is eight hundred thousand volts plus for ultra
Speaker 2: high voltage. Extra high voltage is usually three hundred thousand
Speaker 2: volts plus and so and high voltage can be one
Speaker 2: hundred thousand volts.
Speaker 1: And obviously we get in plugs here in the UK
Speaker 1: two hundred and forty volts, in the US one hundred
Speaker 1: and ten volts.
Speaker 2: Yeah, and so you know, it's quite incredible. And then
Speaker 2: they're able to move power extreme distances. China as a
Speaker 2: large country and they have this backbone that they've built
Speaker 2: to do that.
Speaker 1: And then let's come to India, because I feel like
Speaker 1: when we look at the energy transition, to me, these
Speaker 1: four regions US, Europe, China, and India are in very
Speaker 1: different places, have very different economic thefts, and what happens
Speaker 1: in these regions typically tells you a lot about what
Speaker 1: might happen in other places. And so India is of
Speaker 1: course very far away from the sorts of goals that
Speaker 1: China is trying to be right now or even being
Speaker 1: able to spend a lot like the US or Europe
Speaker 1: is able to on the grid. What does the Indian
Speaker 1: grid need right now that would really allow it to
Speaker 1: deploy more renewables, which is the number one thing it
Speaker 1: needs to do right now.
Speaker 2: I think the opportunity in India rests in digitalization. So
Speaker 2: much of the Indian grid system can be built greenfield
Speaker 2: and has been built greenfield because there was less of
Speaker 2: it there to begin with. And so you're on this
Speaker 2: kind of initial buildout, if you will. And you've seen
Speaker 2: this in the telecom space right where there's markets in
Speaker 2: India itself where they didn't bother putting in copper and
Speaker 2: they went straight to microwave. You can leap frog a
Speaker 2: technology and it allows you to move more quickly. So
Speaker 2: what's the leapfrog for grids? We still got to build
Speaker 2: out this infrastructure. Unfortunately, still do need to put aluminium
Speaker 2: copper to move power. But along the way digitalizing is
Speaker 2: important and retrofitting afterwards can be challenging because ultimately it
Speaker 2: allows you to get more capacity out of every ounce
Speaker 2: of copper and animnum you put into the ground or
Speaker 2: in the air. So building out these substations, getting the
Speaker 2: land upfront that has the ability to put in these
Speaker 2: types of control devices that allows them to digitalize earlier
Speaker 2: on in the trajectory rather than later on. And we're
Speaker 2: starting to see some of this. In talking to some
Speaker 2: of the companies that are deploying this, they're finding that
Speaker 2: India is moving more quickly on the digitalization front than
Speaker 2: you would expect more mature markets to because they can
Speaker 2: do that early on, because they can plan it in
Speaker 2: from the outset, as opposed to a brown field project,
Speaker 2: which can be even in the digital space, quite complicated
Speaker 2: to do.
Speaker 1: We can't go through every country, but to me, the
Speaker 1: African challenge is an interesting one. You know, we talk
Speaker 1: about the continent that has contributed the least to the
Speaker 1: climate problem, but it is likely to suffer the most
Speaker 1: from the climate problem, but also the continent that has
Speaker 1: a ton of resources on renewables that it could a
Speaker 1: use for itself, but also for export industries. However, we've
Speaker 1: also treated African countries as followers of the energy transition.
Speaker 1: They typically look at what India is doing or what
Speaker 1: China is doing, and then try and figure out what
Speaker 1: they could do domestically. That's happened in electric two wheelers,
Speaker 1: it's happening to some extent in the renewables built out.
Speaker 1: Is it the same story on the grid.
Speaker 2: There is an interesting African context here. So we have
Speaker 2: markets across Africa that have underdeveloped grid systems, and like
Speaker 2: the one that comes to mind is South Africa, which
Speaker 2: has had rotating blackouts and a number of challenges with
Speaker 2: their utility as well. But fundamentally, you have energy being
Speaker 2: produced in regions where you can't get it to consumers
Speaker 2: and so the grid has been a challenge there and
Speaker 2: building out the grid will be part of the solution
Speaker 2: for South Africa. Financing is also a challenge, but these assets,
Speaker 2: like the transmission grid assets are often highly strategic and
Speaker 2: not necessarily something that a government in Africa would want
Speaker 2: to have foreign investment fund, and so there's a need
Speaker 2: for an investment vehicle that preserves the desires of the
Speaker 2: South Africa or what have you, but allows private capital
Speaker 2: to still come in. And so we are seeing a
Speaker 2: model emerge in there called this kind of independent transmission
Speaker 2: project model, and it's kind of similar to maybe a
Speaker 2: PPA and what that has done for the generation side,
Speaker 2: but a model that can be used for a country
Speaker 2: to the tract capital but then still preserve the strategic
Speaker 2: nature of that project. There's countries that have toyed with this,
Speaker 2: including Brazil has done auctions using these type of model
Speaker 2: It's been talked about in Vietnam as well, but it
Speaker 2: is being discussed in South Africa, and I think this
Speaker 2: type of model could pan out across Africa and actually
Speaker 2: be a substantial way of this infrastructure being built.
Speaker 1: We've been talking about massive investment, about resources, about engineering planning,
Speaker 1: But what happens if the grid isn't updated at the
Speaker 1: scale needed?
Speaker 2: Yeah, I think that there's an outcome where the grid
Speaker 2: isn't upgraded but we still achieve net zero. I'm not
Speaker 2: sure what year that will be in, but let's put
Speaker 2: that aside. So I don't think a substantial upgrade to
Speaker 2: the grid is a prerequisite to building a net zo system.
Speaker 2: I think it's part of the optimal system though. So
Speaker 2: you can't build an energy system that has a much
Speaker 2: smaller power grid, but it's just suboptimal, and so you
Speaker 2: end up with much more distributed energy resources and more
Speaker 2: localized systems rather than moving power where it's cheap to
Speaker 2: be produced and then consumed accordingly. So I would say
Speaker 2: that is a potential failure. It's not necessarily, you know,
Speaker 2: a world ending problem. But this is where the US
Speaker 2: I felt was heading initially, that you'd end up with
Speaker 2: a much more decent centralized grid system. And some of
Speaker 2: this will make sense for certain markets because the terrain
Speaker 2: the geography is so challenging. In fact, that is the
Speaker 2: optimal solution. But by and large most markets can benefit
Speaker 2: from significant grid build out. And so if we can't
Speaker 2: build out the grid, what we're going to end up
Speaker 2: with is a much more decentralized world. We're going to
Speaker 2: end up with a lot less wind energy and more
Speaker 2: solar energy. And this is what we're seeing already honestly happen.
Speaker 2: And that's partly because the grid is behind. So when
Speaker 2: we look at what our net zero scenario at BENIF shows,
Speaker 2: it wants to build a lot more wind more quickly
Speaker 2: than what we actually see is happening. And so that's
Speaker 2: part of how we know that the grid is a
Speaker 2: bottleneck at present. So this could be one possible failure outcome.
Speaker 2: Another challenging thing that I think about is that we
Speaker 2: do start building out this grid right now, and there's
Speaker 2: a rat impact associated with that, and as a result,
Speaker 2: this second wave of grid build out, which is supposed
Speaker 2: to enable electrification, becomes constrained because now rates are higher
Speaker 2: and so electrification becomes more expensive. A proposition, and so
Speaker 2: the rates of electrification slowed down, and so this is
Speaker 2: a potential risk as well. A lot of things have
Speaker 2: to come together here across the economy to make a
Speaker 2: transition unfold, and the grid is going to bring everything
Speaker 2: into the center.
Speaker 1: Thank you, Sanji, Thank you, Thank you for listening to Zero.
Speaker 1: Share this episode with a friend or someone who hugs
Speaker 1: a pylon. Next week, more on the grid, you'll hear
Speaker 1: from Scottish Power CEO Keith Anderson.
Speaker 2: People have woken up to the importance of the grid,
Speaker 2: walking up to the importance.
Speaker 1: Of how is it we get power to people's homes,
Speaker 1: How is.
Speaker 2: It reconfigure, redesigned the grid system from modern society.
Speaker 1: Keith shares how he's thinking about that question when it
Speaker 1: comes to the four and a half million households here
Speaker 1: in the UK who rely on his company, Scottish Power.
Speaker 1: That's next week on zero Now for those who wait
Speaker 1: till the end the sound of the week, electricity comes
Speaker 1: to our homes in silence, but it does make a
Speaker 1: bunch of sounds on the way. That was the hum
Speaker 1: of a power station transformer that steps up the voltage
Speaker 1: to ready power to travel over long distances. If you
Speaker 1: like this episode, please take a moment to rate or
Speaker 1: review the show on Apple Podcasts and Spotify. You can
Speaker 1: get in touch at zero pod at bloomberg dot net.
Speaker 1: Zero's producer is Mighty le Raw. Bloomberg's Head of podcast
Speaker 1: is Sage Bowman. Head of Talk is Brendan Youno. Our
Speaker 1: theme music is composed by Wonderly Special thanks to Kirra
Speaker 1: Bindrim and Matthew Griffin. I am Shatrati. Back soon means