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Speaker 1: Welcome to Zero. I am Akshatrati. This week gas turbines

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Speaker 1: a blessing or a curse. For the last year at Bloombergreen,

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Speaker 1: I've been investigating bottlenecks to our clean, electrified future. We've

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Speaker 1: covered several different topics on zero, from a lack of

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Speaker 1: grit transformers to the shortage of skilled workers. Today, we

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Speaker 1: are going to be talking about something that might not

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Speaker 1: have an immediately obvious climate benefit. Gas turbines, those spinning

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Speaker 1: things that burn natural gas, turn a generator and produce electricity.

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Speaker 1: There's a growing shortage of gas turbines. It used to

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Speaker 1: take around two years to get a new one, Now

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Speaker 1: it takes up to five or more. Advocates for gas

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Speaker 1: call it a transition fuel, something that can fill the

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Speaker 1: gap between burning coal and moving to one hundred percent

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Speaker 1: carbon free grid. That's because for every killer what are

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Speaker 1: of electricity produced from gas, it only releases half the

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Speaker 1: amount of carbon dioxide as compared to coal. Gas can

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Speaker 1: also provide a useful and relatively cheap backup to renewables,

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Speaker 1: allowing for more clean power to be built out quickly

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Speaker 1: without worries of blackouts. But there are serious concerns about lockin.

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Speaker 1: Once someone spends billions of dollars building a gas power plant,

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Speaker 1: they'll want to run it for long enough that it

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Speaker 1: can make a decent return on their investment. Also, it's

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Speaker 1: worth noting that natural gas is mostly made of methane,

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Speaker 1: which has eighty times the warming potential of carbon dioxide.

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Speaker 1: There's a risk that if methane leaks aren't kept in check,

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Speaker 1: then gas power plants could be worse than coal power plants.

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Speaker 1: Whether you believe gas is a blessing or a curse

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Speaker 1: for the energy transition, the shortage of gas turbines is

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Speaker 1: causing serious headaches in the buildout of the electricity supply

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Speaker 1: that businesses desperately need. Joining me to discuss all this

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Speaker 1: is Steven Stopchinski, who add its energy stories and writes

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Speaker 1: about natural gas for Bloomberg. He and I collaborated with

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Speaker 1: our colleague Jostsol to conduct a global investigation into the

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Speaker 1: state of the gas turbine industry. Today on zero we

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Speaker 1: look at what's causing the bottleneck and gas turbines, whether

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Speaker 1: the shortage will make companies look to renewables or go

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Speaker 1: back to coal, and whether gas is really a bridge

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Speaker 1: to the future or the end goal for the fossil

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Speaker 1: fuel industry. Steven, welcome to the show.

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Speaker 2: Thank you for having me so.

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Speaker 1: I consider you to be Bloomberg's resident expert on natural gas.

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Speaker 1: You nerd out about lnged hankers, you put out tiktoks

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Speaker 1: about crazy price swings, and there are lots of Simpsons

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Speaker 1: characters in there on your charts. I also assume that

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Speaker 1: sitting in Singapore you have set up binoculars that you

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Speaker 1: use to see these bulbous ships go past.

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Speaker 2: Right. Man, if I had a place in Sentosa, I

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Speaker 2: would totally do that, but unfortunately my view is just

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Speaker 2: a bunch of buildings. But when I do go to

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Speaker 2: the beach, I do look out for LNG ships and

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Speaker 2: I see them.

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Speaker 1: So it's great to have you on zero. And we're

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Speaker 1: going to talk about a phenomena that you and I

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Speaker 1: have both seen building up for some time now, but

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Speaker 1: it has come to a crisis point. Is the shortage

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Speaker 1: of gas turbines. When did you first hear about it?

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Speaker 2: You know, I've been reading reports about this for maybe

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Speaker 2: a year, how there have been more gas turbine orders,

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Speaker 2: And I actually didn't pay very much attention to it

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Speaker 2: because I've been covering LNG at Bloomberg for over a decade,

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Speaker 2: and for a long time, gas turbines was one of

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Speaker 2: the more boring parts of the industry. You would order

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Speaker 2: your turbine, it would come twenty four months later, usually

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Speaker 2: without fail there will be no issues. But I was

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Speaker 2: at an energy conference in India and February, and in

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Speaker 2: India they want to boost gas. They want to make

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Speaker 2: it fifteen percent of the energy mix by twenty thirty,

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Speaker 2: basically double where we are today. And so I would

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Speaker 2: ask the utilities, you know, what are you going to do.

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Speaker 2: Your greate is mostly coal? Are you going to build

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Speaker 2: some new gas fire power plants to try to boost

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Speaker 2: those numbers and hit the twenty thirty goal for MODI?

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Speaker 2: And the utilities looked at me and they said, we

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Speaker 2: can't afford that, And I said, why not. It is

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Speaker 2: because the gas is too expensive. You know, the invasion

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Speaker 2: of Ukraine or Russia kind of shocked the market. Prices jumped,

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Speaker 2: and they said, well, that's one issue, but another is

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Speaker 2: gas fire power plants are just too expensive for us

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Speaker 2: to build at the moment. It makes far more sense

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Speaker 2: for us to look at coal or even in some

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Speaker 2: cases renewables I was a little bit surprised by that.

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Speaker 2: I didn't know gas power plants got so expensive and

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Speaker 2: they're on the front lines, probably one of the more

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Speaker 2: price sensitive buyers. So that got me kind of looking

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Speaker 2: into it, and I realized that there was just something

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Speaker 2: happening in the market. From Asia to the US to Europe,

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Speaker 2: people weren't getting the turbines that they wanted quickly, and

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Speaker 2: it was costing them far more money.

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Speaker 1: Yeah. So it is a strange thing because if you

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Speaker 1: are not the nerd that is Steven who looks at

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Speaker 1: energy prices daily, you're going to be like, hold on

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Speaker 1: a minute. Was the Russia Ukraine War that caused this

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Speaker 1: huge gas bike people were struggling to get gas and

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Speaker 1: now we have gone and swung the other way where

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Speaker 1: it's not about gas shortages, it's about the shortage of

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Speaker 1: gas turbines. How does that happen?

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Speaker 2: First off, I think we need to explain very bally

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Speaker 2: what a gas turbine is. Right, it's the heart of

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Speaker 2: a power plan. So if you want to generate electricity,

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Speaker 2: you have to build a power plant and essentially turn

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Speaker 2: a turbine, and that's where the gas turbine comes in.

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Speaker 2: It's one of the more efficient ways to produce electricity

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Speaker 2: at a large scale. It's very complicated. These things are

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Speaker 2: the size of the bus. They weigh the same as

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Speaker 2: a fully loaded Boeing seven forty seven, and this is

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Speaker 2: a piece of equipment that has been in demand right

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Speaker 2: The demand for gas fire power plants has been pretty

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Speaker 2: steady over the last decade, especially in the United States.

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Speaker 2: The US built a number of gas fire power plants

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Speaker 2: after the Shell Revolution caused gas prices to drop, making

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Speaker 2: it more affordable than coal. Likewise, places like Japan, Korea,

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Speaker 2: and even in China to an extent, have been turning

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Speaker 2: more to gas because they're able to deal with different

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Speaker 2: changes in power supply from renewables. Gas plants known as

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Speaker 2: peaker plants, can quickly ramp up and ramp down output,

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Speaker 2: unlike coal, so which is more steady across the board.

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Speaker 2: So there has already been this demand for gas, and

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Speaker 2: on top of that, the power industry has been looking

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Speaker 2: at gas as a way to shift away from coal.

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Speaker 2: So here in Asia, especially in the emerging world, which

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Speaker 2: is very dependent on coal, they've been looking at instead

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Speaker 2: of building new coal fire power plants to meet their

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Speaker 2: rapid demand increases. Of Vietnam, India and other places. There's

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Speaker 2: been a kind of a shift to look at how

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Speaker 2: can we build more gas fire power plants. One of

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Speaker 2: the reasons being that gas emits about half as much

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Speaker 2: CO two emissions when combusted compared to coal, which is

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Speaker 2: the dirtiest fossil fuel. Now there's been this kind of

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Speaker 2: steady demand across Asia because of that, and especially in

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Speaker 2: the last I think ten years, a lot of countries

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Speaker 2: have been pushing forward with their plans to build more

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Speaker 2: gas fire power plants. Now you look at the West,

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Speaker 2: it's a different sort of story. Power demand had largely

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Speaker 2: been sort of peaking in the US. You saw it

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Speaker 2: kind of an increase, but it has been pretty steady.

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Speaker 2: But the AI boom in particular has really increased the

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Speaker 2: need for electricity, especially as there's a large build out

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Speaker 2: in data centers. I mean, the numbers there are pretty ridiculous.

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Speaker 2: In the US, they're looking to potentially see peak demand

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Speaker 2: increase by one hundred and fifty gigawatts over the next

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Speaker 2: decade due in part two AI. That's an eighteen percent

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Speaker 2: growth from current levels. It's like adding the equivalent of California,

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Speaker 2: Texas and New York to the power system, and then

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Speaker 2: on top of that, the US has to also replace

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Speaker 2: old coal plants and old gas plants. That's another essentially

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Speaker 2: one hundred and twenty gigwatts of existing power capacity, or

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Speaker 2: ten percent of the total US fleet that's expected to

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Speaker 2: retire over the coming decade. All of that together really

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Speaker 2: increases demand there and it's caused a spike in orders

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Speaker 2: for turbines.

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Speaker 1: And what you and I have been hearing from the

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Speaker 1: industry is that there's this timeframe which is to be

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Speaker 1: about twenty four months to get a gas turbine, has

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Speaker 1: now suddenly gone to five years, or you just cannot

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Speaker 1: get on the queue to get one of these large

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Speaker 1: gas turbines. So that's when you and I and our

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Speaker 1: colleague in New York, Josh Saul, teamed up and we

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Speaker 1: wanted to understand the real reasons for why this kind

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Speaker 1: of shortage exists. And this story needed three reporters in

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Speaker 1: three regions, right absolutely.

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Speaker 2: I think because the nature of the industry, there are

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Speaker 2: three major suppliers that essentially dominate it. There's giev Renova,

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Speaker 2: which is essentially located in North America. There's Semens, which

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Speaker 2: is located in Europe. You went to see them there.

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Speaker 2: And then there's Mitsubishi Heavy, which is a Japanese company,

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Speaker 2: and each of them kind of have a large share.

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Speaker 2: While they do sell turbines across different regions, they really

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Speaker 2: do sort of dominate their home markets. So, for example,

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Speaker 2: Mitsubishi Heavy, a lot of their customers are in Asia.

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Speaker 1: And so this episode is part of the Bottlenecks series

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Speaker 1: where we've covered the things that are holding back the

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Speaker 1: world from speeding up toward a cleaner and more electrified future.

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Speaker 1: And throughout we've found that there are a few reasons

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Speaker 1: that these bottlenecks exist. So in this case, given Semen's Energy,

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Speaker 1: jie Van Nova and Mitsubushi Heavy own about seventy percent

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Speaker 1: of the market for large gas turbines, isn't it the

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Speaker 1: onus on them to expand capacity. They are going to

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Speaker 1: earn tens of millions of dollars per turbine, Their profits

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Speaker 1: are going to be great, They're already pretty good. Why

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Speaker 1: is it that their expansion is not keeping up with

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Speaker 1: the of the demand for these turbines.

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Speaker 2: I think you have to kind of look at the

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Speaker 2: history of this industry first to go into that. So

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Speaker 2: back in two thousand, there was another gas turbine boom

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Speaker 2: due in part to deregulation in the United States. There

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Speaker 2: were a lot of orders in Texas, and you saw

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Speaker 2: orders of turbines rise to above one hundred gigawatts of orders.

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Speaker 2: The capacity today is about sixty gaguats. Now, the industry

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Speaker 2: did build up and they spent a lot of money

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Speaker 2: investing in new capacity in the early aughts, but the

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Speaker 2: demand quickly fell apart and they didn't see a return

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Speaker 2: to that one hundred gigawatt level, and that gas turbine

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Speaker 2: boom in the early oughts really fizzled for a few reasons. One,

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Speaker 2: gas prices. Natural gas prices rose in the United States,

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Speaker 2: making it not very economical to operate these facilities. They

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Speaker 2: just kind of got out of vogue because it was

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Speaker 2: too expensive. And then right after that, there was a

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Speaker 2: financial crisis, which just took a hit to power demand

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Speaker 2: as well, and utilities weren't eager to build new power plants.

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Speaker 2: So over the last two decades, while there has been

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Speaker 2: increases here and there and have been hills and valleys,

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Speaker 2: the industry was really hurt by that and they never

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Speaker 2: kind of recovered, and a lot of people who are

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Speaker 2: executives today at Cemen's ge Rinova and Mitsubishi Heavy have

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Speaker 2: memories of that, and so they're worried again that is

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Speaker 2: its demand really going to stick? You know, the AI

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Speaker 2: boom clearly, you know, we write a lot about it,

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Speaker 2: and you are seeing data center build out in the

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Speaker 2: United States and you are seeing a lot more demand

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Speaker 2: for electricity out of certain parts of the US. But

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Speaker 2: how sticky is that, I think are what people in

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Speaker 2: the industry are wondering. That's the one thing, Because the

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Speaker 2: other thing is that this is hyper technical, hyper specialized

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Speaker 2: equipment that requires really a certain type of factory that

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Speaker 2: can't just be built overnight, and so investing in that

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Speaker 2: requires a lot of money, a lot of expertise, and

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Speaker 2: a lot of time. So do they one still expect

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Speaker 2: that this demand increase will last over the next five

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Speaker 2: to ten years, as some analysts are saying, And then two,

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Speaker 2: do they have the wherewithal to really look at building

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Speaker 2: new factories? Because actually Mitsubishi Heavy has said to us

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Speaker 2: we had an exclusive interview with their CEO. He said

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Speaker 2: that they're looking to double their capacity. But when you

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Speaker 2: get into the details, it's not that they're building a

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Speaker 2: new factory. They're just trying to make their existing factory

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Speaker 2: as efficient as possible. So I think what you're going

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Speaker 2: to see is folks are going to try to pump

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Speaker 2: out as much as they can out of their existing

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Speaker 2: factories before they really look at putting shovels in the

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Speaker 2: ground to build new factories that are going to cost

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Speaker 2: a lot of more money.

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Speaker 1: That's the same thing I found reporting on Semen's Energy

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Speaker 1: that they have already increased the number of cast turbines

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Speaker 1: that they can make from their existing factory over the

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Speaker 1: last two years, and they are looking to expand, but

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Speaker 1: only within the dimensions of their own factory, which is

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Speaker 1: in central Berlin, and so there's not that much land

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Speaker 1: to expand, and so they're having to move some parts

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Speaker 1: of it out just to be able to ensure that

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Speaker 1: can produce more gas turbines from those places. So you

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Speaker 1: touched a little bit on the fact that the factory

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Speaker 1: itself as complicated, But surely, given how much money you

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Speaker 1: could be making, why aren't small companies or even startups

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Speaker 1: coming into solve what is clearly a big commercial opportunity.

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Speaker 2: The thing with the turbines is that these companies have

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Speaker 2: been developing them for decades. It is not something that

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Speaker 2: they came in and decided, hey, we're gonna crash this out.

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Speaker 2: These aren't startups. These are companies that have been working

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Speaker 2: on turbines for in some cases close to a century.

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Speaker 2: When I met with the folks at Mitsubishi Heavy in Tokyo,

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Speaker 2: they told me that it's really this testing. It's the

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Speaker 2: data that they've collected through decades and decades of operations. Actually,

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Speaker 2: one interesting thing about mitsbec Heavy is that they have

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Speaker 2: their turbine. They're one of their turbines operating at their

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Speaker 2: factory so that they can use it as a test

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Speaker 2: case for when they make small tweaks to the design.

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Speaker 2: It's something that's really important that others cannot easily do.

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Speaker 2: And on top of that, turbines are just really complicated.

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Speaker 2: We've to an extent, really perfected them. I kind of

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Speaker 2: look at turbines similar to how we look at semiconductors. Right,

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Speaker 2: you can't just jump in and start building a semiconductor.

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Speaker 2: You have to really understand the intricacies of where every

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Speaker 2: single one of those small thousands of blades go. This

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Speaker 2: thing is rotating at three thousand revolutions a minute, and

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Speaker 2: to do that perfectly requires precision, it requires materials, and

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Speaker 2: it requires a wherewithal to keep at it that other

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Speaker 2: companies can't easily break into. And it's actually interesting. China

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Speaker 2: is developing their own turbine. They're looking at commercializing a

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Speaker 2: three hundred megawat turbine, and yet it still isn't up

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Speaker 2: to par with what these three companies are doing with

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Speaker 2: their five hundred to six hundred megawatt level equipment. These

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Speaker 2: companies are also very secretive and they really look after

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Speaker 2: their IP remarkably highly. It's something that I saw when

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Speaker 2: we were interviewing Mitsubishi Heavy Industries. We start a photographer

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Speaker 2: there to look at it. We sent a reporter and

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Speaker 2: he couldn't take pictures inside of the building. One of

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Speaker 2: these issues is this high entry barrier. I think when

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Speaker 2: you spoke with Range Schmirker at Semen's Energy, he had

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Speaker 2: a really interesting quote.

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Speaker 1: Yeah, he said, is the beauty of our industry that

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Speaker 1: it has a super high entry barrier. And that's because

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Speaker 1: it just costs a lot of money to develop these

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Speaker 1: gas turbines and takes years of experience.

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Speaker 2: Now you know, these companies are very very secretive. Like

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Speaker 2: I said, We tried to get some pictures inside the

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Speaker 2: factories at Mitsubishi Heavy they wouldn't allow it in Japan.

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Speaker 2: We weren't very successful. Did you have any better luck

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Speaker 2: action when you went to Seaman Energies factory. Yeah.

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Speaker 1: I was surprised by the fact that they actually let

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Speaker 1: me see all of it without restriction. It felt like that,

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Speaker 1: and towards the end I asked them, what did you

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Speaker 1: not show me? And I'll tell you more about that.

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Speaker 1: But the factory itself was amazing. So it was built

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Speaker 1: in the very early twentieth century, and at that time

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Speaker 1: it was on the edge of Berlin, but of course

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Speaker 1: Berlin has grown since then and so now it sits

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Speaker 1: in the heart of Berlin. Like I was staying in

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Speaker 1: a hotel in central Berlin and it was a ten

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Speaker 1: minute taxi right to get to this massive factory which

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Speaker 1: has three thousand workers, which produces fifty sixty gas turbines

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Speaker 1: a year. The factory itself now has heritage buildings, so

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Speaker 1: certain things cannot be modified because it is considered part

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Speaker 1: of German history. It's made of glass and steel and concrete.

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Speaker 1: It's got massive ceilings going up twenty five meters. The

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Speaker 1: turbine haul itself is two hundred meters long, and you

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Speaker 1: can see from one end to the other end if

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Speaker 1: you go to a high point, and then the equipment itself.

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Speaker 1: I knew what gas turbines looked like, I'd seen photos

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Speaker 1: of them, but seeing them up close is just stunning.

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Speaker 1: There are these massive, really precisely engineered pieces of metal

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Speaker 1: with sometimes really fancy coatings on them that are over months.

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Speaker 1: You know you said takes twenty four months from getting

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Speaker 1: an order to a turbine. It really does take months

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Speaker 1: to be able to ensure all these different parts of

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Speaker 1: the supply chain come into Semen's energy, and that engineers

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Speaker 1: are able to then assemble these tiny pieces all together.

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Speaker 1: And the engineering precision is needed because of the speed

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Speaker 1: at which they're rotating, but also the temperature at which

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Speaker 1: they're operating.

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Speaker 2: Actually, can you just walk through the engineering of a

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Speaker 2: gas turbine forming.

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Speaker 1: It's something that I think most people, at least people

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Speaker 1: who've taken a flight would actually be able to understand

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Speaker 1: pretty easily, because a gas turbine is really a large

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Speaker 1: version of what a jet engine looks like. There is

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Speaker 1: air coming from one end, there is fuel being burnt

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Speaker 1: inside the turbine and the exhaust gases from this combustion

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Speaker 1: is what is in the case of a jet engine,

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Speaker 1: propelling it to fly in the air, in the case

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Speaker 1: of a gas turbine, turning a shaft that then can

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Speaker 1: generate power. But to make that happen is not that simple.

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Speaker 1: It's taking this air, but it compresses it using these

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Speaker 1: rotors and blades that are turning at three thousand revolutions

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Speaker 1: per minute. And in the process of compressing the air,

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Speaker 1: it's heating it up, so it's going from room temperature

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Speaker 1: air to six hundred degrees celsius. And then this hot

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Speaker 1: air is combined with natural gas and burnt in the

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Speaker 1: combustion chamber and raises that temperature to fifteen hundred degrees celsius,

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Speaker 1: and all that hot gas is released out into the

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Speaker 1: exhaust section, where again lots of rotors and blades take

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Speaker 1: all that mechanical energy and turn the shaft. It is simple,

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Speaker 1: and yet because of the pressure and temperature and speed

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Speaker 1: at which it operates, it's really complicated engineering.

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Speaker 2: And then on top of that you also have the

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Speaker 2: combined cycle aspect of it. Do you want to talk

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Speaker 2: about that as well? Really quick?

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Speaker 1: Yeah, It's a good point because when gas turbines were

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Speaker 1: initially created, just like engines, if you just burn the

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Speaker 1: fuel and you let the exhaust go out, the exhaust

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Speaker 1: is at still a pretty high temperature, and which means

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Speaker 1: you're just losing a ton of energy to the atmosphere.

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Speaker 1: That's what gas speaker plants do today. They take the gas,

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Speaker 1: they burn it, and then they let out quite a

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Speaker 1: lot of energy just into the atmosphere. So the industry

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Speaker 1: came up with a way to make the process more efficient.

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Speaker 1: Rather than just leaving this exhaust gas which has so

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Speaker 1: much energy in it, they combined it by taking that

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Speaker 1: exhaust gas, using it to heat water, make steam, and

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Speaker 1: then have a steam turbine turn and make more power.

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Speaker 1: So combined cycle power plant can be as efficient as

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Speaker 1: sixty sixty five percent, whereas a gas turbine plant is

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Speaker 1: thirty five, forty maybe forty three percent efficient at best.

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Speaker 1: After the break, what was the Semen's factory hiding from me?

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Speaker 1: And why were they hiding it? If you're enjoying this episode,

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Speaker 1: please give Zero a review on Apple Podcasts and Spotify

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Speaker 1: to help new listeners find the show. Recently, Travels for

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Speaker 1: Work wrote this podcast is data driven and delivered with

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Speaker 1: so much integrity. There's episodes I have listened to multiple times.

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Speaker 1: Thanks travels for work.

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Speaker 2: All right, and I want to go back to this

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Speaker 2: factory you saw in Berlin. What exactly do you think

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Speaker 2: Siemens was being secretive or hiding stuff from you about.

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Speaker 1: So on the tour, I really couldn't tell, Like there

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Speaker 1: was no closed off area, there was no indication, don't

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Speaker 1: go there, don't see this, And so I just had

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Speaker 1: to ask, because of your experience with Mitsubushi, as like, guys,

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Speaker 1: surely you're hiding something from me. And they said, there

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Speaker 1: are two things we haven't shown you and we can't

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Speaker 1: show you. They said, we can't show you our latest model,

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Speaker 1: which is the nine thousand HL, which produces about six

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Speaker 1: hundred megawads of power. We can't show you because we

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Speaker 1: don't want to show you, but also currently we're not

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Speaker 1: manufacturing one. And then the other side they didn't show

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Speaker 1: me was the design studio where they run simulations on

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Speaker 1: these blades and rotors that determine how gas and air

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Speaker 1: is flowing through the turbine, because that determines how efficient

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Speaker 1: the gas turbine can be, and that is a process

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Speaker 1: that again takes years of work. They do three D

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Speaker 1: printing off metal parts to be able to test them out,

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Speaker 1: and that's the section they didn't show me. Now.

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Speaker 2: Actually, you host this Climate Solutions podcast. Gas turbines are

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Speaker 2: both a blessing and a curse, right they are.

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Speaker 1: You know, you talked a little bit about the fact

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Speaker 1: that in Asia there is this move to go from

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Speaker 1: coal to gas, and that can be a good thing

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Speaker 1: because in total CEO two emissions, burning gas for power

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Speaker 1: produces about half the emissions. There is a downside, which

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Speaker 1: is if gas is leaking and gas has methane as

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Speaker 1: its main component, that can cause sometimes gas to become

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Speaker 1: worse than coal because this methane will end up in

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Speaker 1: the atmosphere. It'll heat up ton for ton the planet

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Speaker 1: about eighty times as much, and that's not good. But

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Speaker 1: if you can keep the leaks to a bare minimum

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Speaker 1: or eliminate them altogether, then you are really getting the

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Speaker 1: benefit of half the emissions for the same amount of power.

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Speaker 1: There's also the curse side, which is once you build

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Speaker 1: a large gas power plant, and this can be you know,

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Speaker 1: billion to billion dollars worth of investment. You as a

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Speaker 1: power company, you as a utility that has ordered a

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Speaker 1: power company to make it for you are going to

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Speaker 1: use it, so it is sunk cost. It is an

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Speaker 1: asset that will have to run its life to make

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Speaker 1: sure the returns have been made. And that means there

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Speaker 1: is a lock in that could come from building all

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Speaker 1: these gas turbines even if the coal to gas switching

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Speaker 1: is happening. And then the curse side also extends into

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Speaker 1: what is happening with the AI boom where they really

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Speaker 1: don't care where the power is coming from, and the

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Speaker 1: data center people are ready to build whatever they can

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Speaker 1: get their hands on. So in a classical case, we

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Speaker 1: had XAI, which is the company that Elon Musk runs,

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Speaker 1: build a data center where they couldn't get a large

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Speaker 1: gas turbine, so they ended up buying tons of small

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Speaker 1: gas turbines which do not have a combined cycle, which

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Speaker 1: burn all this gas, which cause all these methane emissions,

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Speaker 1: but also all these carbon dioxide emissions, and do it

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Speaker 1: in a very inefficient way. And that side is tough,

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Speaker 1: but there could be a blessing, which is we have

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Speaker 1: heard from experts who say that if gasturbine shortage exists,

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Speaker 1: then more and more of these AI data center companies

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Speaker 1: will have to look at renewables and storage and somehow

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Speaker 1: find a way to make it work, and that could

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Speaker 1: create a boom for renewables, especially in the US where

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Speaker 1: the federal government is right now trying to curtail a

435
00:24:01,400 --> 00:24:04,600
Speaker 1: lot of the renewables development through cutting off subsidies, but

436
00:24:04,680 --> 00:24:05,680
Speaker 1: also other problems.

437
00:24:05,960 --> 00:24:08,159
Speaker 2: I mean, but there's just something I have to ask you.

438
00:24:08,320 --> 00:24:10,960
Speaker 2: If if there's a shortage in turbines and you can't

439
00:24:11,160 --> 00:24:14,200
Speaker 2: build power plants, or if the power plants cost too much,

440
00:24:14,400 --> 00:24:17,120
Speaker 2: won't that make companies just look to renewables instead?

441
00:24:17,520 --> 00:24:20,000
Speaker 1: It is I mean, we looked at the cost of

442
00:24:20,119 --> 00:24:23,400
Speaker 1: these gas power plants from next Energy, which is one

443
00:24:23,400 --> 00:24:26,280
Speaker 1: of the biggest utilities in the US. We got an estimate.

444
00:24:26,640 --> 00:24:29,840
Speaker 1: They said that a combined cycle gas power plant used

445
00:24:29,880 --> 00:24:32,800
Speaker 1: to cost about eight hundred dollars a KILLOWOT in twenty

446
00:24:32,840 --> 00:24:36,600
Speaker 1: twenty one. Today that cost is about two thousand, six

447
00:24:36,720 --> 00:24:39,920
Speaker 1: hundred dollars to two thousand, eight hundred dollars a killo VOT.

448
00:24:40,400 --> 00:24:44,080
Speaker 1: And the kicker is that next Era CEO John Ketchum

449
00:24:44,119 --> 00:24:46,880
Speaker 1: said gas fire power plants in the US will come

450
00:24:46,920 --> 00:24:51,480
Speaker 1: online at a higher cost than renewables plus battery storage,

451
00:24:51,800 --> 00:24:55,520
Speaker 1: and so we will see AI data center companies turn

452
00:24:56,200 --> 00:25:00,359
Speaker 1: to renewables plus storage. But we also know currently battery

453
00:25:00,359 --> 00:25:03,800
Speaker 1: storage cannot do all the things that gas turbines can do.

454
00:25:04,359 --> 00:25:07,440
Speaker 1: So gas turbines provide something called inertia, which is something

455
00:25:07,440 --> 00:25:11,199
Speaker 1: we've discussed in this series in bottlenecks before, where just

456
00:25:11,280 --> 00:25:15,120
Speaker 1: a spinning mass is necessary to keep the frequency and

457
00:25:15,280 --> 00:25:18,840
Speaker 1: the voltage stable on the grid, we can find devices

458
00:25:18,920 --> 00:25:21,840
Speaker 1: like a synchronous compensator which does the turning, doesn't burn

459
00:25:21,920 --> 00:25:25,720
Speaker 1: any gas, but you need that extra device to provide

460
00:25:25,760 --> 00:25:28,520
Speaker 1: that inertia. Batteries may be able to do it at

461
00:25:28,520 --> 00:25:33,240
Speaker 1: some point, but they can't always, or utilities aren't trusting

462
00:25:33,400 --> 00:25:37,240
Speaker 1: of batteries to do that just yet. Plus batteries still

463
00:25:37,280 --> 00:25:39,680
Speaker 1: remain pretty expensive, so you might be able to cover

464
00:25:39,880 --> 00:25:43,439
Speaker 1: two hours, four hours, or even eight hours of gap

465
00:25:43,560 --> 00:25:46,400
Speaker 1: between not having enough sun and not having enough wind,

466
00:25:46,920 --> 00:25:50,040
Speaker 1: but gas power can cover you twenty four to seven

467
00:25:50,440 --> 00:25:53,280
Speaker 1: at a stable rate, So it's not a perfect one

468
00:25:53,320 --> 00:25:56,640
Speaker 1: to one, and yet sure companies will turn to renewables,

469
00:25:56,680 --> 00:26:00,679
Speaker 1: but not enough. So then coming to the side off

470
00:26:01,200 --> 00:26:05,280
Speaker 1: the blessing, there was this move in Asia to convert

471
00:26:05,320 --> 00:26:09,159
Speaker 1: away from gold into gas. From your vantage point, looking

472
00:26:09,240 --> 00:26:14,000
Speaker 1: at this region, what are examples where this turbine shortage

473
00:26:14,160 --> 00:26:16,840
Speaker 1: is actually holding back this switching from happening.

474
00:26:17,800 --> 00:26:20,560
Speaker 2: You know, I think one country that I looked at

475
00:26:20,640 --> 00:26:24,640
Speaker 2: very closely for this story is Vietnam. Vietnam has these

476
00:26:24,800 --> 00:26:27,880
Speaker 2: huge plants. They want to basically double their power capacity

477
00:26:27,920 --> 00:26:30,199
Speaker 2: by twenty thirty. This isn't an Ai story. This is

478
00:26:30,280 --> 00:26:34,359
Speaker 2: just a developing country. They've got industry people, it's growing

479
00:26:34,359 --> 00:26:38,160
Speaker 2: at a rapid pace, so they need a lot of energy. Now,

480
00:26:38,200 --> 00:26:40,439
Speaker 2: a large part of that will come from renewables, but

481
00:26:40,520 --> 00:26:43,320
Speaker 2: they also want to add potentially thirty gigatts of gas

482
00:26:43,320 --> 00:26:48,080
Speaker 2: fire generation. That's like twenty two new at least gas

483
00:26:48,119 --> 00:26:52,639
Speaker 2: power plants by twenty thirty. Now, I surveyed every developer

484
00:26:52,680 --> 00:26:56,680
Speaker 2: of these projects, and through that and through different analysis

485
00:26:56,760 --> 00:27:00,760
Speaker 2: of what's been publicly released by utilities, only think one

486
00:27:00,800 --> 00:27:04,080
Speaker 2: of those power plants has secured a gas turbine, and

487
00:27:04,119 --> 00:27:06,040
Speaker 2: that power plant's going to come online at the end

488
00:27:06,359 --> 00:27:09,680
Speaker 2: of this decade. Now, the issue with that is if

489
00:27:09,800 --> 00:27:14,000
Speaker 2: Vietnam can't get these power plants online, they either face

490
00:27:14,400 --> 00:27:18,119
Speaker 2: energy shortages, which they clearly don't want or they double

491
00:27:18,160 --> 00:27:21,280
Speaker 2: down back on coal, which is something that is a

492
00:27:21,280 --> 00:27:24,440
Speaker 2: big risk and could happen if they don't have other

493
00:27:24,480 --> 00:27:29,320
Speaker 2: options available to them. That's specifically an issue for the

494
00:27:29,320 --> 00:27:32,760
Speaker 2: emerging world where you can't, like you've been describing, quickly

495
00:27:32,880 --> 00:27:37,400
Speaker 2: ramp up renewables and batteries. It's just not economically feasible.

496
00:27:37,400 --> 00:27:41,200
Speaker 2: And also their demand is just constantly growing and growing.

497
00:27:41,240 --> 00:27:44,320
Speaker 2: They need large power plants to be on the grid

498
00:27:44,520 --> 00:27:46,600
Speaker 2: be providing power around the clock.

499
00:27:47,240 --> 00:27:49,840
Speaker 1: So far, we've looked at the fact that we've gone

500
00:27:49,840 --> 00:27:54,000
Speaker 1: from high gas price to actually having gas turbine shortages.

501
00:27:54,160 --> 00:27:56,560
Speaker 1: There is a combination in the West of AI data

502
00:27:56,600 --> 00:28:00,800
Speaker 1: centers and there is this need in the East switching

503
00:28:00,840 --> 00:28:05,000
Speaker 1: from gold to gas that is causing the demand for

504
00:28:05,040 --> 00:28:09,200
Speaker 1: gas turbines to spike. We've also seen these three companies

505
00:28:09,200 --> 00:28:12,880
Speaker 1: Semens Energy, g Vernova and Mitsubushi Heavy that we've reported

506
00:28:12,920 --> 00:28:16,560
Speaker 1: on that they are looking to expand the capacity of

507
00:28:16,600 --> 00:28:19,639
Speaker 1: their manufacturing but not really build new factories. So the

508
00:28:19,680 --> 00:28:21,600
Speaker 1: expansion is not going to happen at the pace at

509
00:28:21,600 --> 00:28:25,600
Speaker 1: which the demand is growing. But let's look at the

510
00:28:25,640 --> 00:28:30,359
Speaker 1: next decade. What does the supply and demand outlook look like.

511
00:28:30,640 --> 00:28:33,320
Speaker 2: Right now? Demand for this year is looking to shape

512
00:28:33,400 --> 00:28:38,880
Speaker 2: up to over sixty gigawatts of orders for new turbines. Now,

513
00:28:39,000 --> 00:28:42,040
Speaker 2: that's a really important number and threshold because according to

514
00:28:42,080 --> 00:28:46,800
Speaker 2: some analysts, that's the capacity of global production. So that's

515
00:28:46,800 --> 00:28:49,200
Speaker 2: the annual production of what the world can produce for

516
00:28:49,360 --> 00:28:52,479
Speaker 2: new turbines. We're going to be at that level or

517
00:28:52,560 --> 00:28:55,520
Speaker 2: over it this year, and then from twenty twenty six,

518
00:28:55,600 --> 00:28:58,080
Speaker 2: twenty twenty seven, twenty twenty eight and onwards at least

519
00:28:58,080 --> 00:29:00,680
Speaker 2: through twenty thirty or beyond were to be above that

520
00:29:00,800 --> 00:29:04,120
Speaker 2: level every year. And so the current capacity of where

521
00:29:04,160 --> 00:29:07,520
Speaker 2: we are, you just can't build that much, which means

522
00:29:07,560 --> 00:29:10,080
Speaker 2: that there will be a number of power plants dozens

523
00:29:10,120 --> 00:29:13,360
Speaker 2: and dozens of gigawatts of capacity that is either planned

524
00:29:13,400 --> 00:29:15,640
Speaker 2: or in pre construction level will not be able to

525
00:29:15,680 --> 00:29:18,880
Speaker 2: get their turbine on time or at all. In some cases,

526
00:29:18,920 --> 00:29:20,920
Speaker 2: if you look at the emerging world, how can you

527
00:29:20,960 --> 00:29:24,480
Speaker 2: even compete and try to build a project if it

528
00:29:24,560 --> 00:29:27,840
Speaker 2: is multiple times more expensive than it was a few

529
00:29:27,920 --> 00:29:31,600
Speaker 2: years ago. So that's the situation, and one of the

530
00:29:31,600 --> 00:29:35,200
Speaker 2: outcomes of that could very well be there are some

531
00:29:35,240 --> 00:29:38,120
Speaker 2: countries that can afford to build gas fire power plants

532
00:29:38,120 --> 00:29:39,760
Speaker 2: and there are others that cannot.

533
00:29:40,600 --> 00:29:40,719
Speaker 1: Now.

534
00:29:40,800 --> 00:29:43,760
Speaker 2: The industry, of course, like you said, is responding. So

535
00:29:43,800 --> 00:29:47,880
Speaker 2: we're seeing GeV Vernova looking to expand their capacity. One

536
00:29:47,920 --> 00:29:51,000
Speaker 2: analyst says that they could increase by thirty percent over

537
00:29:51,040 --> 00:29:53,440
Speaker 2: the next few years. It's be she heavy told us

538
00:29:53,440 --> 00:29:56,040
Speaker 2: that they're looking to double their capacity over in the

539
00:29:56,080 --> 00:29:59,160
Speaker 2: next several years as well. Siemens has some plans. I

540
00:29:59,200 --> 00:30:00,800
Speaker 2: know they were a little bit care with you when

541
00:30:00,800 --> 00:30:04,000
Speaker 2: you spoke with them, but they're also, according to analysts,

542
00:30:04,040 --> 00:30:07,520
Speaker 2: looking to expand. But even with that expansion, analysts are

543
00:30:07,560 --> 00:30:09,120
Speaker 2: saying that we're not going to be able to meet

544
00:30:09,240 --> 00:30:11,640
Speaker 2: the orders that are being given. And on top of that,

545
00:30:11,720 --> 00:30:14,680
Speaker 2: there's an interesting thing happening. Those are just orders, right,

546
00:30:14,680 --> 00:30:18,240
Speaker 2: those are binding contracts. There's another thing where people are

547
00:30:18,240 --> 00:30:22,400
Speaker 2: making they're putting five, ten percent, twenty percent down to

548
00:30:22,760 --> 00:30:25,960
Speaker 2: basically reserve a turbine and we're not even counting that.

549
00:30:26,240 --> 00:30:29,440
Speaker 2: And that's also playing out, and people are reserving turbines

550
00:30:29,720 --> 00:30:31,880
Speaker 2: so much. It wasn't something that was happening a few

551
00:30:31,920 --> 00:30:34,760
Speaker 2: years ago, but it's something that happened in two thousand.

552
00:30:35,160 --> 00:30:38,560
Speaker 2: When there was that first boom two decades ago, people

553
00:30:38,640 --> 00:30:41,680
Speaker 2: were reserving and kind of trading those slots, and you're

554
00:30:41,680 --> 00:30:42,720
Speaker 2: seeing that emerge again.

555
00:30:43,440 --> 00:30:47,160
Speaker 1: These slots can be millions of dollars worth of slots

556
00:30:47,160 --> 00:30:50,880
Speaker 1: that companies are just ready to pay upfront for access

557
00:30:50,880 --> 00:30:53,520
Speaker 1: to a turbine that may or may not come by

558
00:30:53,560 --> 00:30:56,760
Speaker 1: twenty thirty or even beyond that. It's kind of stunning

559
00:30:57,000 --> 00:30:59,680
Speaker 1: what could be a curveball in this supplied amount of

560
00:30:59,680 --> 00:31:03,120
Speaker 1: outlat It's already looking pretty strained.

561
00:31:03,200 --> 00:31:07,600
Speaker 2: It is, and I think China, unfortunately, is potentially that curveball.

562
00:31:07,680 --> 00:31:10,960
Speaker 2: It is one of the pressure points that if China

563
00:31:11,080 --> 00:31:13,880
Speaker 2: wants to suddenly build a lot of gas fire power plants,

564
00:31:14,120 --> 00:31:17,200
Speaker 2: then you could be in a situation where the global

565
00:31:17,240 --> 00:31:21,360
Speaker 2: supply chain is even more strained. Now it isn't guaranteed

566
00:31:21,400 --> 00:31:24,040
Speaker 2: at the moment, but there was an outline by some

567
00:31:24,120 --> 00:31:27,400
Speaker 2: domestic energy producers that they want to push in the

568
00:31:27,440 --> 00:31:30,000
Speaker 2: next five year plan that's coming out next year to

569
00:31:30,720 --> 00:31:34,600
Speaker 2: basically sanction construction about seventy gigawatts of new gas fire

570
00:31:34,680 --> 00:31:37,120
Speaker 2: capacity by the end of the decade in China. Now,

571
00:31:37,520 --> 00:31:41,080
Speaker 2: China doesn't have really their own large scale turbines. They

572
00:31:41,080 --> 00:31:44,440
Speaker 2: still depend on giv Veranova and folks like Mitsubishi Heavy.

573
00:31:44,720 --> 00:31:47,000
Speaker 2: So if China comes in big and suddenly decides, hey,

574
00:31:47,040 --> 00:31:49,240
Speaker 2: we want to shift away on our power grid from

575
00:31:49,280 --> 00:31:51,960
Speaker 2: coal to a degree and really go harder into gas,

576
00:31:52,720 --> 00:31:55,560
Speaker 2: then and they have the money in the capacity to

577
00:31:55,600 --> 00:31:59,560
Speaker 2: do that, then they might suddenly also start reserving slots

578
00:32:00,120 --> 00:32:02,560
Speaker 2: or buying a lot of turbines. I think one other

579
00:32:03,320 --> 00:32:06,240
Speaker 2: thing is the Middle East, which we haven't mentioned yet,

580
00:32:06,280 --> 00:32:10,200
Speaker 2: but Saudi Arabia is planning over twenty gigawatts of new

581
00:32:10,560 --> 00:32:14,480
Speaker 2: capacity editions by twenty thirty. I heard anecdotally that they're

582
00:32:14,560 --> 00:32:17,960
Speaker 2: essentially paying any price to get their turbines because they

583
00:32:18,000 --> 00:32:19,680
Speaker 2: have the money to do that, and they want to

584
00:32:19,720 --> 00:32:22,440
Speaker 2: get basically get away from oil, which makes up half

585
00:32:22,440 --> 00:32:24,800
Speaker 2: of their power grid by the end of the decade.

586
00:32:25,200 --> 00:32:28,880
Speaker 1: Let's take one last climate question, because on gas turbines

587
00:32:29,240 --> 00:32:32,760
Speaker 1: it's a complicated story. There was this talk about natural

588
00:32:32,760 --> 00:32:35,800
Speaker 1: gas at one point being the transition fuel. It was

589
00:32:35,840 --> 00:32:39,040
Speaker 1: this time when renewables were still pretty expensive. They were

590
00:32:39,080 --> 00:32:41,280
Speaker 1: coming down in price, but nobody knew if they could

591
00:32:41,320 --> 00:32:43,480
Speaker 1: fall as far as they have fallen now, and so

592
00:32:43,560 --> 00:32:46,600
Speaker 1: people thought, okay, well, goal is too bad. Let's move

593
00:32:46,600 --> 00:32:49,280
Speaker 1: to natural gas. It'll provide this lower emission fuel. As

594
00:32:49,280 --> 00:32:53,720
Speaker 1: we get to absolutely clean renewables, that talk of transition

595
00:32:53,880 --> 00:32:57,600
Speaker 1: fuel is coming back. Now it's been called the bridge

596
00:32:57,600 --> 00:32:59,880
Speaker 1: fuel again. What do you make of this?

597
00:33:00,360 --> 00:33:02,240
Speaker 2: I write a lot about the industry, and they've been

598
00:33:02,320 --> 00:33:05,000
Speaker 2: they've always been calling it a bridge fuel. And what

599
00:33:05,040 --> 00:33:06,960
Speaker 2: they're doing is they're actually doubling it down and they're

600
00:33:06,960 --> 00:33:09,400
Speaker 2: saying it's the destination. So they're not having saying a

601
00:33:09,400 --> 00:33:11,880
Speaker 2: bridge or temporary. They're saying it's a destination. So if

602
00:33:11,920 --> 00:33:14,240
Speaker 2: the industry gets what they want, then these gas plants

603
00:33:14,240 --> 00:33:16,960
Speaker 2: are going to be operating well past the middle of

604
00:33:17,000 --> 00:33:20,400
Speaker 2: the century. I think the key thing about the climate

605
00:33:20,840 --> 00:33:23,800
Speaker 2: is that, yes, building a gas power plant if you're

606
00:33:23,840 --> 00:33:26,440
Speaker 2: able to shift away from coal and use it as

607
00:33:26,440 --> 00:33:30,520
Speaker 2: a peaker plant to compliment intermittent renewables, so you're not

608
00:33:30,640 --> 00:33:33,200
Speaker 2: using it at you know, eighty percent ninety percent capacity

609
00:33:33,480 --> 00:33:37,160
Speaker 2: and definitely and you're slowly ramping down that output, and

610
00:33:37,200 --> 00:33:39,480
Speaker 2: you're using that generation just when you need it, either

611
00:33:39,680 --> 00:33:43,000
Speaker 2: at at night or when there's you know, heat in Vietnam,

612
00:33:43,240 --> 00:33:46,520
Speaker 2: or if if you need inertia on the grid. But

613
00:33:46,600 --> 00:33:48,760
Speaker 2: if you're building it and you're using it like a

614
00:33:48,800 --> 00:33:51,240
Speaker 2: coal plant, where you're using it as a base load

615
00:33:51,520 --> 00:33:53,680
Speaker 2: around the clock. You're never reducing it. You're going to

616
00:33:53,800 --> 00:33:55,600
Speaker 2: use it because you need to. You spend all this

617
00:33:55,680 --> 00:33:57,080
Speaker 2: money on it, and you're going to use it to

618
00:33:57,080 --> 00:34:00,240
Speaker 2: twenty fifty to twenty sixty and beyond. That's when the

619
00:34:00,400 --> 00:34:02,840
Speaker 2: argument of the bridge fuel starts to fall apart and

620
00:34:02,880 --> 00:34:06,640
Speaker 2: the argument of the destination kind of takes over. So

621
00:34:06,680 --> 00:34:09,280
Speaker 2: I think that's the slippery slope in the climate debate

622
00:34:09,320 --> 00:34:09,759
Speaker 2: for this.

623
00:34:10,160 --> 00:34:12,120
Speaker 1: And we're going to start to see that debate play

624
00:34:12,120 --> 00:34:14,200
Speaker 1: out here in the UK. They're planning to get to

625
00:34:14,440 --> 00:34:17,240
Speaker 1: in ninety five percent clean power grid by twenty thirty,

626
00:34:17,600 --> 00:34:19,960
Speaker 1: and in that plan, they are going to increase gas

627
00:34:20,320 --> 00:34:23,600
Speaker 1: power capacity but reduce the amount of gas that is

628
00:34:23,640 --> 00:34:26,160
Speaker 1: being burned exactly by using it in the climate friendly

629
00:34:26,200 --> 00:34:29,319
Speaker 1: ways you suggest. And then we'll see countries like the

630
00:34:29,440 --> 00:34:33,680
Speaker 1: US or Vietnam to tell us the counterpoint of what

631
00:34:33,800 --> 00:34:36,880
Speaker 1: the climate cost of gas could be. This was a

632
00:34:36,920 --> 00:34:39,560
Speaker 1: great story to work on together, Steven. Thank you for

633
00:34:39,640 --> 00:34:42,360
Speaker 1: your insights from Asia, and thanks also to our colleague

634
00:34:42,520 --> 00:34:46,120
Speaker 1: Josh Saul for reporting in the US. Thank you for

635
00:34:46,160 --> 00:34:54,160
Speaker 1: having me, and thank you for listening to zero Now

636
00:34:54,200 --> 00:35:07,120
Speaker 1: for the sound of the week. That's the sound of

637
00:35:07,200 --> 00:35:10,960
Speaker 1: a Pine Martin. The species was almost hunted to extinction

638
00:35:11,000 --> 00:35:13,800
Speaker 1: in the UK, but is now making a comeback thanks

639
00:35:13,800 --> 00:35:17,799
Speaker 1: to successful reintroduction efforts across England, Wales and Scotland over

640
00:35:17,840 --> 00:35:21,160
Speaker 1: the last decade. If you like this episode, please take

641
00:35:21,200 --> 00:35:22,959
Speaker 1: a moment to rate and review the show on Apple

642
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Speaker 1: Podcasts and Spotify. Share this episode with a friend or

643
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Speaker 1: with someone who is good at keeping secrets. This episode

644
00:35:29,960 --> 00:35:32,920
Speaker 1: was produced by Oscar boyd Our. Theme music is composed

645
00:35:32,920 --> 00:35:38,160
Speaker 1: by Wonderly Special Thanks to Josh soul Nicholas Takahashi, David Stringer,

646
00:35:38,400 --> 00:35:44,160
Speaker 1: Emily Buzzo, Jody Maxin, somnadbad Somarsadi, Moses Andam, Laura Milan

647
00:35:44,360 --> 00:35:47,479
Speaker 1: and Sharon Chan i'm Akshadarrati Back soon