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Speaker 1: Welcome to Zero. I'm Akshadarrati. This week Bottlenecks. Today we're

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Speaker 1: going to start a new series which we are calling Bottlenecks,

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Speaker 1: and the first episode is about why we are working

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Speaker 1: on this series for Bloombergreen and about the first story

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Speaker 1: that I wrote for it to help me set out

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Speaker 1: the series. Zero's producer, Oscar Boyd will be asking me

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Speaker 1: the questions instead. Welcome Oscar. Hello, Aksha, thank you for

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Speaker 1: lending me your chair for today. So for as long

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Speaker 1: as I've.

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Speaker 2: Known you, you've really nerded out over electrification and its

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Speaker 2: role in decarbonizing everything around us. I remember back to

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Speaker 2: one of the first ever episodes we made of Zero together,

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Speaker 2: and that was you trying to explain to me that

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Speaker 2: inner workings of a battery at some atomic level. And

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Speaker 2: I remember first out of the job thinking, I've been

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Speaker 2: off way, way, way more than I can chew here.

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Speaker 2: And I think I can safely say that your interest

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Speaker 2: in electrification has only grown as it's become more and

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Speaker 2: more apparent that electrification is the way forward for so

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Speaker 2: much of the clean tech story. And now you and

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Speaker 2: other colleagues at Bloomberg Green have started the series called Bottonex.

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Speaker 2: Do you want to start just by explaining what the

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Speaker 2: series is about.

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Speaker 1: So it's not like it's a new thing. Electrify everything

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Speaker 1: has been a mantra that's been used by many climate

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Speaker 1: people for quite a few years. And there's a really

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Speaker 1: good reason for why, because when you use electricity and

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Speaker 1: you use electrical devices, you're typically very efficient at converting

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Speaker 1: energy into productive outcome, whether that's moving your car, heating

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Speaker 1: your home, powering a data center, which is only something

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Speaker 1: you can do with electricity, but you can do it

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Speaker 1: very efficiently. And you have to decarbonize electricity. So if

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Speaker 1: you can electrify the economy and have all these renewable

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Speaker 1: energy sources zero carbon so that are becoming cheaper and

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Speaker 1: more widely acceptable, happens simultaneously you start to decarbonize the world.

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Speaker 1: And that's a really, really crucial way in which we

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Speaker 1: can solve majority of the climate problem.

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Speaker 2: And we are doing both of those things. But break

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Speaker 2: it down to me, maybe we can start first with

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Speaker 2: the decobonizing of the electricity sector. How are we doing

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Speaker 2: in regards to that.

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Speaker 1: So this is something we've talked about on the show

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Speaker 1: so many times. In twenty twenty four, the world spent

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Speaker 1: two point one trillion dollars on clean energy and the

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Speaker 1: energy transition. Vast majority of that money went into decarbonizing electricity.

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Speaker 1: That's building huge solar plants and wind farms, but also

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Speaker 1: strengthing the grid because if you don't do that, we

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Speaker 1: can get things like the Spanish blackout. And sure, the

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Speaker 1: politics have shifted a little bit in twenty twenty five

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Speaker 1: with Donald Trump in the White House, and so we

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Speaker 1: might see a slowdown in places like the US where

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Speaker 1: policies will be rolled back, or even like the UK

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Speaker 1: where and off your wind farm was canceled because it

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Speaker 1: was too expensive to build. But overall, we do know

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Speaker 1: that decarbonizing electricity is on a momentum that will continue.

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Speaker 1: It's not the same on electrifying everything.

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Speaker 2: And when we're saying electrify everything, that's really like the

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Speaker 2: objects that we use in our everyday life. The object's

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Speaker 2: industry use as well, things like electric cars to replace

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Speaker 2: fossil fuel engines, things like electric art furnaces to replace

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Speaker 2: blast furnaces which would typically be powered by coal. Things

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Speaker 2: like that. That's what we're talking about when we say

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Speaker 2: electrify everything.

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Speaker 1: Yeah, very much so, but also things that aren't typically

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Speaker 1: on people's horizons. So electrifying heating because a lot of

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Speaker 1: energy that is used not just in homes through heat pumps,

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Speaker 1: but in industry. To run industrial processes requires a very

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Speaker 1: hot steam, for example, and you could now build electric

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Speaker 1: heaters that are essentially very big heat pumps to do that.

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Speaker 1: Or you could start to electrify planes. Initially planes going

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Speaker 1: over short distances, but eventually even longer distances could be electrified.

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Speaker 1: So there's a whole host of things that we do

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Speaker 1: know we can move away from burning stuff to using

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Speaker 1: clean electrons.

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Speaker 2: On the electro five everything front, you've said that electric

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Speaker 2: devices are more efficient, they're better at converting energy into

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Speaker 2: the final output do you actually want? And normally efficiency

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Speaker 2: ultimately eventually leads to things being cheaper, and if they're cheaper,

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Speaker 2: you think people would actually want these things. Also, you

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Speaker 2: get the nice side effect of no pollution. So surely

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Speaker 2: case made, job done. WHI aren't these things taking off exactly?

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Speaker 3: Mark?

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Speaker 1: This is something I've scratched my head over so many times.

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Speaker 1: There's this fantastic ad that was put out by one

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Speaker 1: of the electrical appliance makers I think sometime in the

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Speaker 1: last century. Where you see people going about an office

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Speaker 1: or a home using devices which we use with electricity,

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Speaker 1: but instead having like a little internal combustion engine. So

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Speaker 1: when you're making coffee, you actually kick on a little

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Speaker 1: engine that's burning fuel, that's producer in pollution, and you're

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Speaker 1: getting your coffee. On the side. You're doing the same

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Speaker 1: thing for your printer. You're doing the same thing to

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Speaker 1: run your computer. It's bizarre, right, we want electricity because

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Speaker 1: it's just a convenient way of using energy.

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Speaker 2: You're not having to look after a two stroke diesel

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Speaker 2: engine every time you want to use your.

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Speaker 1: Printing, right, not having enough mechanics to fix your things.

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Speaker 1: But you're right if that is the case. We want convenience,

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Speaker 1: and these devices are efficient, which means they ought to

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Speaker 1: be saving money. Why aren't we electrifying everything at pace?

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Speaker 1: And the answer is complicated. On the one hand, electricity

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Speaker 1: itself is a much more complicated source of energy to manage.

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Speaker 1: It's difficult to understand how it moves and how it

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Speaker 1: fails when it does right. We've had these two blackouts recently,

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Speaker 1: one at heat Throw one in Spain, and we still

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Speaker 1: don't know weeks on what exactly happened. In those places,

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Speaker 1: so it's complicated. It's difficult to store. We know that

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Speaker 1: energy storage is such a crucial aspect of the energy

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Speaker 1: transition that hasn't been solved, and rising of electricity sadly

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Speaker 1: still remains a real challenge. So many places, like here

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Speaker 1: in the UK, electricity is far too expensive to actually

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Speaker 1: make the efficiency also make it cheaper. So all these combinations,

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Speaker 1: which are also bottlenecks, need to be sorted to make

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Speaker 1: the economic case for electrifying everything really land.

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Speaker 2: Okay, so you've wiped out those all these buttlenecks, but

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Speaker 2: you're not the first person to discover these, surely.

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Speaker 1: So we know that bottlenecks to electrifying. There are some

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Speaker 1: real physical challenges that we talked about, but also just

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Speaker 1: bureaucratic challenges. Right getting permissions to build solar plants or

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Speaker 1: transmission lines is getting harder and harder in most countries,

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Speaker 1: not just in Western rich countries. We know that building

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Speaker 1: these electrical infrastructure requires up front capital which isn't always available,

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Speaker 1: especially when interest rates are very high or the stock

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Speaker 1: market is doing funny things as it has done over

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Speaker 1: the past few months. Those are things that people have

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Speaker 1: identified as bottlenecks that need to be resolved their complex

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Speaker 1: solutions to them. But there are all these other little ones,

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Speaker 1: or perhaps little seen ones, that are also holding back electrification,

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Speaker 1: things like making a particular device just in the sheer

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Speaker 1: numbers that we need to build them today, but there's

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Speaker 1: not enough manufacturing capacity or training the people that we

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Speaker 1: need to be able to go out and build this infrastructure.

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Speaker 1: And so this series is about the less obvious bottlenecks

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Speaker 1: to electrifying everything.

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Speaker 3: And I suppose there's also quite a lot of the

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Speaker 3: nurser in the system. Right.

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Speaker 2: For quite a few decades, you know, electricity has been

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Speaker 2: basically plateaued in most countries. It's not been seen as

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Speaker 2: this exciting sector of the economy that we need more

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Speaker 2: money and time and skills into, so things haven't been

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Speaker 2: built for a while.

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Speaker 1: That's particularly true in Western economies, in the US, in Europe.

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Speaker 1: In the US, electricity demand has been pretty much flat,

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Speaker 1: maybe slightly rising over the past three decades. In Europe

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Speaker 1: it's actually been declining. But places like India and China,

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Speaker 1: which have seen five to ten percent annual electricity growth,

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Speaker 1: those guys face very different bottlenecks. Their challenges aren't the

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Speaker 1: same ones as the Europeans and the Americans face. And

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Speaker 1: now with the rise of these devices from electric cars,

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Speaker 1: to heat pumps, to data centers, and this movement to

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Speaker 1: electrify everything, finally US and Europe are seeing electricity demand

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Speaker 1: rise quickly and that is also creating bottlenecks.

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Speaker 2: So let's moves on to the subject today's episode, our

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Speaker 2: first episode of the Bottleneck series on Zero, where we'll

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Speaker 2: be discussing an article that you recently wrote and published.

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Speaker 2: Do you want to introduce the subject rise?

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Speaker 1: So I started looking at these things called transformers, their

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Speaker 1: devices on the grid that are crucial to make the

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Speaker 1: grid work. And I've been working on figuring out just

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Speaker 1: why are they bottlenecks, What is holding them back? Why

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Speaker 1: are people in the industry worried about it? But nobody

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Speaker 1: in the public knows. And then about a week before

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Speaker 1: I was supposed to publish the article about this bottleneck,

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Speaker 1: there was a serious outage in London near the Heathrow

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Speaker 1: Airport that brought down the airport for nearly twenty four hours,

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Speaker 1: cost sixty million pounds worth of loss for a single

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Speaker 1: device that blew up, which was a transformer. I had

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Speaker 1: my notifications blow up because of all these people I

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Speaker 1: was talking to about transformers, and they were saying, hey,

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Speaker 1: have you seen this? Hey have you seen this? And

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Speaker 1: it's a coincidence that I wasn't expecting, but it kind

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Speaker 1: of makes the point. Transformers are a bottleneck to maintaining electricity,

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Speaker 1: not just growing the grid.

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Speaker 2: So transformers were suddenly huge international news because, of course,

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Speaker 2: heather is the UK's largest airport. It's one of the

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Speaker 2: largest airports in Europe. I think a thousand flights were

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Speaker 2: canceled that day and at least one hundred thousand passengers

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Speaker 2: were left stranded, And suddenly everyone was thinking about transformers,

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Speaker 2: as you say, this incredibly important bit of electrical infrastructure.

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Speaker 2: But before we continue, before we get too deep into this,

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Speaker 2: you know, when you say transformers, the first thing that

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Speaker 2: pops into my mind is Optimus Prime doing his battle

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Speaker 2: against the Scepticons.

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Speaker 1: Everyone, everyone.

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Speaker 2: That would make for a very different discussion to the

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Speaker 2: one we're about to have. So when you were talking

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Speaker 2: about transformers, what exactly do you mean? Can you paint

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Speaker 2: a little bit of a picture of the size, the

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Speaker 2: scale the thing that we are talking about.

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Speaker 1: Yeah, let me take even one more step back because

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Speaker 1: the reason we use transformers is that we are all

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Speaker 1: using alternating current. This is ACY, this is AC, and

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Speaker 1: it is something we don't think about on a day

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Speaker 1: to day basis. But about a century and a bit ago,

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Speaker 1: there was actually a war of currents between the famous

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Speaker 1: inventor Thomas Edison and a less famous but pretty important inventor,

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Speaker 1: George Westinghouse, and they were going head to head. It

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Speaker 1: was actually Edison who wanted DC direct current, and it

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Speaker 1: was Westinghouse who was pushing AC. We live in Westinghouses world,

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Speaker 1: even though Edison is the more famous one. And the

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Speaker 1: reason that AC one out is because at that time

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Speaker 1: the technology to move power over long distances could only

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Speaker 1: be pulled off using alternating current. And the reason that

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Speaker 1: could happen is because of transformers. Transformers are these devices

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Speaker 1: that convert the voltage that an electricity travels at. Either

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Speaker 1: they increase it or they decrease it. Now, voltage is

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Speaker 1: a very weird concept to get your head around, but

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Speaker 1: the best way to think about it is to think

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Speaker 1: of a waterfall. The height of the waterfall is the

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Speaker 1: voltage at which the electricity is traveling, and the amount

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Speaker 1: of waterfalling through it is the current that is going

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Speaker 1: through the cable at the moment, and so current and

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Speaker 1: voltage are very important characteristics of electricity. They are inversely proportional,

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Speaker 1: which means if you increase the voltage, you can decrease

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Speaker 1: the current, or vice versa. And when you're traveling long distances,

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Speaker 1: you actually want electricity to travel with low currents, so

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Speaker 1: there's low resistance, so there's low losses. But at high

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Speaker 1: voltage that's what is possible, and transformers are the objects

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Speaker 1: that make that possible.

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Speaker 2: And the reason this is important is because the way

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Speaker 2: the electricity system works is that at different points in

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Speaker 2: the electricity system you want different voltages because different voltages

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Speaker 2: allow those specific parts of the system to work at

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Speaker 2: their optimum. So at home in the UK, at least,

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Speaker 2: we want two hundred and thirty volts higher than that,

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Speaker 2: and all your computers, your HiPhones, et cetera.

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Speaker 3: Would probably fry bingo.

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Speaker 1: At power plants, like a gas powerplant, you're producing electricity

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Speaker 1: to get a few thousand volts. Set a solar plant

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Speaker 1: at a few hundred volts, but that's in a way

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Speaker 1: too low to actually move it long distances. So right

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Speaker 1: at the powerplant there's a big transformer, it's called a

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Speaker 1: step up transformer that takes it from a few hundred

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Speaker 1: earth thousand wolves to maybe even hundreds of thousands of volts.

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Speaker 2: And this is to send it then through the cables

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Speaker 2: that we think of as transmission lines.

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Speaker 1: Those big pylons that you see when you're traveling outside

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Speaker 1: on a highway. They'll take that power hundreds of kilometers

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Speaker 1: away at that high voltage while losing very little of

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Speaker 1: the energy that electricity is carrying at that moment.

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Speaker 2: Let's just pose there for a second. If that electricity

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Speaker 2: going through the cables was at a much lower voltage

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Speaker 2: and a higher current, what would happen.

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Speaker 1: So that is the problem that Edison faced. If you

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Speaker 1: had direct current at that time, there was no way

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Speaker 1: to increase the voltage of direct current to a very

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Speaker 1: high level. You could only actually take it a few

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Speaker 1: miles out. All your power will be lost just in

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Speaker 1: the transporting of that electricity to that distance. AC overcomes

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Speaker 1: that problems and makes it possible not just hundreds of

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Speaker 1: kilometers but thousands of kilometers.

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Speaker 2: But these days we have hv DC cables, so high

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Speaker 2: voltage direct current cables that run thousand kilometers under the

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Speaker 2: see they exist. Do they not overcome this problem?

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Speaker 3: Yes?

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Speaker 1: They do, and in fact we have come round to

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Speaker 1: what Thomas Edison wanted to happen. And in fact HVDC

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Speaker 1: is even more efficient than AC. But I think we

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Speaker 1: should save that for another discussion because that gets into

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Speaker 1: a weird territory of technical points about why exactly the

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Speaker 1: technology to make high voltage direct current took so long

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Speaker 1: to be developed.

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Speaker 2: Okay, so today we'll park HVDC cables to the side

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Speaker 2: and step on transformers. So you said there were step

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Speaker 2: up transformers which increased the voltage, and then you've got

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Speaker 2: step down transformers.

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Speaker 3: So what does that do?

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Speaker 1: A step down transformer does what it says on the tin.

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Speaker 1: It lowers the voltage because after the electricity has traveled

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Speaker 1: hundreds of kilometers at hundreds of thousands of volts, it

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Speaker 1: needs to be brought down to the level that it

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Speaker 1: could be used in electrical devices on a day to

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Speaker 1: day basis, which is typically one hundred two hundred volts

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Speaker 1: depending on where you are in the world.

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Speaker 3: Tell me what does the transformer look like?

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Speaker 1: Oh, it's like weird shaped and all size shaped, so

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Speaker 1: it could be as small as a trash can. Size

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Speaker 1: device which is hung up on a pole outside your home.

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Speaker 1: Many people see it never realize it's a transformer. Or

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Speaker 1: it could be the size of a shipping container and

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Speaker 1: so heavy that you need not just one truck, but

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Speaker 1: several trucks and several hundred tires to be able to

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Speaker 1: carry such a device. So transformers look weird metal boxes

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Speaker 1: with weird things sticking out of them, of all kinds

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Speaker 1: of sizes. And I can guarantee you if you have

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Speaker 1: walked in a city, any city in the world, you

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Speaker 1: have at one point passed a transformer without realizing that

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Speaker 1: there was one. We know, in numbers, at least in

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Speaker 1: the US there are something like eighty million small transformers,

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Speaker 1: which means one for every four or five people in America.

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Speaker 1: There are also transformers of crazy number of varieties. So

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Speaker 1: one estimate from the US Department of Energy was there

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Speaker 1: eighty thousand models of transformers just in the US, and

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Speaker 1: I really couldn't wrap my head around it. So the

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Speaker 1: nearest comparison I could find is that is as much

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Speaker 1: as every unique car model ever manufactured.

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Speaker 2: I mean that's huge. Eighty thousand different models of transformers.

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Speaker 2: Why are there's so many different varieties I would expect,

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Speaker 2: you know, if they're necessary everywhere, you would just say, okay,

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Speaker 2: we need a big one, a medium one, and a

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Speaker 2: small one. Let's just mass produce those and we're done

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Speaker 2: with it.

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Speaker 1: Yeah, exactly. And this is the difficulty of electricity. What

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Speaker 1: happens is that the grid behaves in different ways depending

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Speaker 1: on the size and the location where power is moving from,

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Speaker 1: where it's being generated, where it's being consumed. And so

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Speaker 1: what ended up happening was to manage the grid, electrical

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Speaker 1: engineers came up with those specific transformers needed at that

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Speaker 1: node in the grid, and it worked like magic, and

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Speaker 1: so they just kept building these customized transformers for these

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Speaker 1: specific places. So, yes, there is some standardization on the

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Speaker 1: small transformers, but on the large transformers, there's just whatever

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Speaker 1: is needed at that point in the grid. And it

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Speaker 1: is really becoming a problem because if you need to

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Speaker 1: have a custom build transformer, you need to have a

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Speaker 1: custom maker of that transformer somewhere taking your order and

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Speaker 1: working on your specific needs. There is a movement that

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Speaker 1: is happening around the industry to try and standardize the transformer.

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Speaker 1: But the electricity industry, which is the other thing I

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Speaker 1: learned reporting this story is just really very conservative. It's

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Speaker 1: actually not like the oil and gas industry, which takes

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Speaker 1: on these risks and tries to share or tries to

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Speaker 1: figure out how to compress things in a more efficient way.

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Speaker 1: Has these large companies who wanted to throw money at

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Speaker 1: R and D. Electricity companies for the most part, are

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Speaker 1: either state owned or heavily regulated by the government and

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Speaker 1: are just wanting to make sure things work and there

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Speaker 1: are no blackouts, and they are really conservative. So if

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Speaker 1: something's working, like a custom made transformer, let's keep going

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Speaker 1: that way, please.

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Speaker 2: How bad in terms of the timeline to get a

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Speaker 2: transformer delivered? Has this shortage become.

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Speaker 1: So you could have got a large power transformer which

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Speaker 1: is custom made in a year's time, fifteen months, eighteen months.

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Speaker 1: That's now doubled or tripled in some cases. So three

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Speaker 1: to five years for a large power transformer is pretty

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Speaker 1: common these days, and that's a real challenge for anybody

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Speaker 1: planning a power plant. A solar power plant at most

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Speaker 1: takes six months twelve months to put together, but if

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Speaker 1: a transformer can't be secured for three or five years,

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Speaker 1: the energy transition gets delayed.

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Speaker 2: We'll be back with more of my conversation with ac

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Speaker 2: chat Ratty after this short break. And Hey, if you're

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Speaker 2: enjoying this episode, please rate in review zero on Apple.

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Speaker 3: Podcasts and Spotify.

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Speaker 2: Your feedback really matters to the show and helps new

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Speaker 2: listeners discover it.

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Speaker 4: Thank you.

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Speaker 2: You say they're everywhere. They're crucial to maintaining our entire

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Speaker 2: electricity system. And now we have this huge demand for electricity.

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Speaker 2: Surely that's prime conditions for there to be a boom

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Speaker 2: in the manufacture of transformers.

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Speaker 1: Yes, So when I asked the question to industry experts,

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Speaker 1: they said, the difficulty has been that the transformer industry

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Speaker 1: has gone through a boom and bus cycle that has

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Speaker 1: made them really conservative. So companies like G E. Vanova,

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Speaker 1: Hitachi Energy, these are big, giant, multi billion dollar companies

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Speaker 1: in the world that make all kinds of infrastructure, but

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Speaker 1: they saw the transformer business not be as profitable as

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Speaker 1: they had expected. So around the late tooth thousands, there

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Speaker 1: was a growth in electricity demand and transformer makers just

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Speaker 1: like now, saw that they needed to boost their manufacturing

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Speaker 1: to be able to keep up with that demand and

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Speaker 1: to be able to make more profits, and so they

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Speaker 1: started investing in this manufacturing capacity, and of course then

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Speaker 1: the financial crisis came and all that demand that was

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Speaker 1: expected disappeared and those investments turned sour and they made

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Speaker 1: a bunch of losses. So this time around, when they

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Speaker 1: are seeing this electricity demand rise, they're saying, wait a minute,

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Speaker 1: maybe it's there, maybe it's not there in the future.

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Speaker 1: We aren't ready yet to make the investments needed, unless,

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Speaker 1: of course governments want to subsidize that.

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Speaker 2: And as part of your reporting, you actually went to

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Speaker 2: one of these transformer factories in the town of Stafford,

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Speaker 2: which is just north of Birmingham in England. What was

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Speaker 2: it like in this factory.

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Speaker 1: It's the only transformer factory left in the UK, so

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Speaker 1: I was lucky at least there's one I could go to.

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Speaker 1: He was a stunning place. So Stafford has a history

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Speaker 1: of actually making electrical infra structure for well over one

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Speaker 1: hundred years.

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Speaker 3: Huge factory.

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Speaker 1: I mean you go inside, and I mean inside factories,

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Speaker 1: but like this. The scale of this one was just enormous,

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Speaker 1: floor to ceiling, probably seven eight floors, all empty space

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Speaker 1: because you need to have equipment that's moving around.

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Speaker 5: When we ship a large transformer on one of these transporters,

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Speaker 5: we actually have police escort all the way to L's.

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Speaker 3: We are quickause of their weight time.

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Speaker 5: Yeah, typically three hundred tons something like that, three hundred

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Speaker 5: and fifty tons.

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Speaker 1: So yeah, the transformers that they made at this factory

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Speaker 1: are a very large power transformers. They're use typically to

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00:21:39,080 --> 00:21:43,359
Speaker 1: take electricity that is coming from offshore wind farms and

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Speaker 1: then brought on shore, so they're handling electricity at hundreds

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Speaker 1: of thousands of volts and making them is really interesting

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Speaker 1: because it goes through this process that requires engineering precision

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Speaker 1: for each component in the device. And we had the

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Speaker 1: operations your Jeevan Nova. Eduardo Villar tell us it's not

400
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Speaker 1: like making a bottle. There are thousands of parts in

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Speaker 1: a transformer.

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Speaker 2: How many of these big transformers are they making a

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Speaker 2: year a We're talking hundreds, we're talking one thousands.

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00:22:12,400 --> 00:22:16,400
Speaker 1: No, it's a factory that is getting expanded right now

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Speaker 1: and is going to increase its capacity by fifty percent,

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Speaker 1: and by the end of it, it's going to be

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Speaker 1: able to make about three dozen transformers a year, so

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Speaker 1: thirty six, that's right.

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Speaker 2: So I want to try and ground this a little

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00:22:29,920 --> 00:22:33,640
Speaker 2: bit in I guess people's more everyday experience of transformers

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Speaker 2: you know, we have these challenges going on behind the scenes,

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Speaker 2: but obviously most of us don't think about transformers and

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Speaker 2: how they're used. So what are some of the real

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00:22:40,560 --> 00:22:44,160
Speaker 2: impacts of this shortage of transformers.

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Speaker 1: So Heathrow actually brought this home really well. Right, if

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Speaker 1: you get a transformer blowing up and you get the

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Speaker 1: spare one as it happened in Heathrow's case, also going

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Speaker 1: down at the same time, well you get a black cut.

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Speaker 1: That is an extreme scenario. In most cases, what a

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Speaker 1: shortage of transformers is doing is just slowing down the

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Speaker 1: building of electrical infrastructure, and that's increasing costs. So your

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00:23:08,359 --> 00:23:11,160
Speaker 1: hyperscalers as they are known these days, that data center

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00:23:11,200 --> 00:23:14,840
Speaker 1: companies or the tech companies that want data centers just

424
00:23:14,920 --> 00:23:18,000
Speaker 1: want data centers and they want it to day. But

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00:23:18,640 --> 00:23:21,400
Speaker 1: if they're not transformers, they can't get the power coming

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00:23:21,480 --> 00:23:24,959
Speaker 1: at the right voltages that they need, and they're going

427
00:23:25,040 --> 00:23:26,800
Speaker 1: to have to wait, which means they're going to lose

428
00:23:26,800 --> 00:23:28,359
Speaker 1: out on business, or they're going to lose out to

429
00:23:28,359 --> 00:23:30,720
Speaker 1: a competitor, or they just have to pay through the

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00:23:30,800 --> 00:23:33,960
Speaker 1: nose to kick somebody out in another waiting list and

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00:23:34,040 --> 00:23:35,919
Speaker 1: get that transformer at whatever price.

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Speaker 3: They can.

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00:23:37,240 --> 00:23:40,440
Speaker 1: It happened earlier this year when Microsoft signed a contract

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00:23:40,480 --> 00:23:44,240
Speaker 1: to get a nuclear power plant in the US restarted.

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00:23:44,920 --> 00:23:47,360
Speaker 1: That nuclear power plant is a giant one. It requires

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00:23:47,359 --> 00:23:50,199
Speaker 1: a giant transformer, and the company that is going to

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Speaker 1: restart that plant was willing to pay one hundred million dollars.

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Speaker 2: One hundred million dollars for a transformer a typical transfer

439
00:23:57,119 --> 00:23:58,800
Speaker 2: cost of heater going down for a day.

440
00:23:58,760 --> 00:24:01,560
Speaker 1: Yes, and the trust the cost of a typical transformer,

441
00:24:01,640 --> 00:24:04,600
Speaker 1: the highest that I could ask industry expert has been

442
00:24:04,640 --> 00:24:07,440
Speaker 1: about two million, three million dollars. So somebody is willing

443
00:24:07,480 --> 00:24:10,000
Speaker 1: to pay thirty times as much just to make sure

444
00:24:10,040 --> 00:24:12,080
Speaker 1: that they have the right device in the right place.

445
00:24:12,480 --> 00:24:13,760
Speaker 2: And one of the things I think that was really

446
00:24:13,760 --> 00:24:16,360
Speaker 2: interesting in your article is you talked about the lack

447
00:24:16,400 --> 00:24:18,600
Speaker 2: of spares in the industry. So it's not just you know,

448
00:24:18,640 --> 00:24:22,200
Speaker 2: for people who are building new projects. It's that when

449
00:24:22,240 --> 00:24:26,080
Speaker 2: things go down now, there isn't the infrastructure to replace

450
00:24:26,119 --> 00:24:28,040
Speaker 2: the transformers that have broken. And this has a really

451
00:24:28,040 --> 00:24:33,440
Speaker 2: interesting intersection with climate as we're seeing more extreme weather events.

452
00:24:33,760 --> 00:24:35,919
Speaker 2: So in your PC talked about the impacts of Hurricane

453
00:24:35,920 --> 00:24:38,680
Speaker 2: Helene when it hit eastern Tennessee last year, and how

454
00:24:38,680 --> 00:24:40,840
Speaker 2: that actually took out a bunch of transformers and they've

455
00:24:40,880 --> 00:24:42,480
Speaker 2: had a really tough time replacing those.

456
00:24:42,640 --> 00:24:46,000
Speaker 1: Yes, we know that extreme weather events are having all

457
00:24:46,040 --> 00:24:50,159
Speaker 1: sorts of impacts on infrastructure, and electrical infrastructure is of

458
00:24:50,200 --> 00:24:54,800
Speaker 1: course everywhere and very exposed. We had another example that

459
00:24:54,840 --> 00:24:58,639
Speaker 1: we found in Kentucky where a cyclone took down the

460
00:24:58,680 --> 00:25:02,800
Speaker 1: electrical infrastructure and the transformers along with it, and replacing

461
00:25:02,840 --> 00:25:07,080
Speaker 1: them just took a lot longer. So the business park

462
00:25:07,080 --> 00:25:10,600
Speaker 1: in the Tennessee case couldn't get power for eight months,

463
00:25:11,040 --> 00:25:14,760
Speaker 1: and the houses that needed to be built in Kentucky

464
00:25:15,000 --> 00:25:19,359
Speaker 1: could not get power for many months afterwards. And utilities

465
00:25:19,440 --> 00:25:25,640
Speaker 1: are starting to manage that somehow by essentially hoarding transformers,

466
00:25:26,359 --> 00:25:29,400
Speaker 1: having many more spares than would have been typically needed

467
00:25:30,080 --> 00:25:32,960
Speaker 1: had there been not this level of extreme weather event.

468
00:25:33,760 --> 00:25:36,879
Speaker 1: Or if you can't hold a transformer, you go begging.

469
00:25:37,000 --> 00:25:39,840
Speaker 1: As we learn from utilities that some of them just

470
00:25:39,920 --> 00:25:42,440
Speaker 1: go to their neighbors and be like, well, we need

471
00:25:42,480 --> 00:25:44,840
Speaker 1: it now, you have some spares, can we get them now?

472
00:25:45,200 --> 00:25:50,160
Speaker 1: We'll fill your banks later, And sometimes the neighborly utility

473
00:25:50,240 --> 00:25:52,400
Speaker 1: is friendly enough to give you one, So he said

474
00:25:52,400 --> 00:25:55,159
Speaker 1: it's taking five years now to get a large transformer.

475
00:25:55,240 --> 00:25:57,120
Speaker 1: But I assume a lot of that data was collected

476
00:25:57,680 --> 00:26:01,960
Speaker 1: pre global trade war. Has been the effect of tariffs

477
00:26:02,000 --> 00:26:05,800
Speaker 1: on transformers. Yes, the data is pre tariff wars. We

478
00:26:05,920 --> 00:26:10,200
Speaker 1: do know one thing that tariffs are already making transformers

479
00:26:10,240 --> 00:26:13,320
Speaker 1: more expensive because a lot of the transformers, especially in

480
00:26:13,359 --> 00:26:17,320
Speaker 1: the US eighty percent of the transformers are imported, and

481
00:26:17,520 --> 00:26:21,080
Speaker 1: those contracts on imports are linked to the commodity price

482
00:26:21,119 --> 00:26:23,840
Speaker 1: of steel, because a lot of the transformer is just steel.

483
00:26:24,119 --> 00:26:26,720
Speaker 1: And so as soon as the price of steel goes up,

484
00:26:26,760 --> 00:26:28,800
Speaker 1: because you've got these startifs, the price of a transformer

485
00:26:28,840 --> 00:26:31,280
Speaker 1: goes up, the price of what the utility is paying

486
00:26:31,320 --> 00:26:33,960
Speaker 1: is going up, and thus the price of electricity is

487
00:26:33,960 --> 00:26:37,639
Speaker 1: going up, all sorts of downstream impacts. Experts told me

488
00:26:37,720 --> 00:26:40,760
Speaker 1: that they expect that if the tariff wars continue, we'll

489
00:26:40,800 --> 00:26:44,680
Speaker 1: get a longer timeline on transformers. But it's also a

490
00:26:44,760 --> 00:26:48,200
Speaker 1: dynamic system. Maybe it forces people to actually finally make

491
00:26:48,240 --> 00:26:52,120
Speaker 1: the decision on building bigger factories like Jieva Nova's doing

492
00:26:52,119 --> 00:26:52,840
Speaker 1: here in the UK.

493
00:26:53,160 --> 00:26:55,920
Speaker 2: And you mentioned still there. That's also another problem, sourcing

494
00:26:55,920 --> 00:26:58,639
Speaker 2: this very specific type of steel that's used in transformers,

495
00:26:58,680 --> 00:27:01,960
Speaker 2: which is called grain orted electric steel goes.

496
00:27:02,640 --> 00:27:04,920
Speaker 1: Yeah, it's a very funny acronym, and there are quite

497
00:27:04,920 --> 00:27:09,240
Speaker 1: a few of those in the electrical world. But steel

498
00:27:09,240 --> 00:27:12,760
Speaker 1: in general is what transformers need. Obviously, the steel on

499
00:27:12,800 --> 00:27:15,480
Speaker 1: the outside, that is what most people see. That's pretty

500
00:27:15,520 --> 00:27:17,879
Speaker 1: standard steel. You can get it wherever you want. But

501
00:27:17,920 --> 00:27:20,280
Speaker 1: the steel that goes inside is a very specific kind.

502
00:27:20,600 --> 00:27:23,600
Speaker 1: So yes, transformers are all different sizes from trash cans

503
00:27:23,640 --> 00:27:27,960
Speaker 1: to shipping containers, but the components inside the transformer, each

504
00:27:28,000 --> 00:27:31,840
Speaker 1: of them are pretty standard. So you have a core

505
00:27:31,960 --> 00:27:34,800
Speaker 1: which is made out of this grain oriented steel, and

506
00:27:35,040 --> 00:27:38,520
Speaker 1: there is a global shortage of enough people making that

507
00:27:38,560 --> 00:27:42,040
Speaker 1: type of steel. There are two sets of copper cables

508
00:27:42,080 --> 00:27:46,400
Speaker 1: that are attached on this core, So you need copper,

509
00:27:46,600 --> 00:27:49,560
Speaker 1: you need steel, and you need them to be built

510
00:27:49,560 --> 00:27:53,040
Speaker 1: in a very specific way for the need of the grid.

511
00:27:53,480 --> 00:27:54,879
Speaker 2: So I imagine one way we can get around the

512
00:27:54,880 --> 00:27:59,160
Speaker 2: shortage would be hopefully technological improvements. Are we seeing many

513
00:27:59,160 --> 00:28:01,399
Speaker 2: developments in the channel form a space when it comes

514
00:28:01,440 --> 00:28:04,760
Speaker 2: to improving their efficiency or the amount of steel you

515
00:28:04,840 --> 00:28:06,280
Speaker 2: need or copper or anything.

516
00:28:06,520 --> 00:28:10,920
Speaker 1: So the core technology for transformers is one hundred years old.

517
00:28:10,960 --> 00:28:14,159
Speaker 1: There have been small developments that have made it more

518
00:28:14,200 --> 00:28:17,000
Speaker 1: efficient over the years, but there have been all things

519
00:28:17,040 --> 00:28:22,520
Speaker 1: on the edges. There hasn't been any fundamental invention that

520
00:28:22,560 --> 00:28:25,560
Speaker 1: has become commercial on transformers. That is not to say

521
00:28:25,640 --> 00:28:28,359
Speaker 1: those don't exist. There are all these ideas where you

522
00:28:28,400 --> 00:28:32,600
Speaker 1: could get a transformer that could be trucked to a

523
00:28:32,680 --> 00:28:36,000
Speaker 1: site when it's needed and it's not custom built for

524
00:28:36,040 --> 00:28:38,680
Speaker 1: that location, but it could be adjusted to meet the

525
00:28:38,720 --> 00:28:42,760
Speaker 1: needs of that specific spot. Or there are these new

526
00:28:42,840 --> 00:28:46,600
Speaker 1: types of transformers called solid state transformers, which are much

527
00:28:46,880 --> 00:28:49,920
Speaker 1: more compact that also do not need to be custom built.

528
00:28:49,960 --> 00:28:53,479
Speaker 1: It could be programmed to work for the voltages that

529
00:28:53,560 --> 00:28:57,320
Speaker 1: are needed on the grid. But those are all things

530
00:28:57,320 --> 00:29:00,520
Speaker 1: that are technologies that haven't yet been come up visualized

531
00:29:00,600 --> 00:29:04,800
Speaker 1: because the industry that uses these transformers are very conservative

532
00:29:04,840 --> 00:29:08,480
Speaker 1: about trying new technology. But again, this kind of shortage

533
00:29:08,600 --> 00:29:11,760
Speaker 1: is exactly the point that will cause enough stress on

534
00:29:11,800 --> 00:29:15,239
Speaker 1: the system and get people moving to perhaps try some

535
00:29:15,280 --> 00:29:18,880
Speaker 1: of these technologies out. That's what Benjamin Boucher, a senior

536
00:29:18,880 --> 00:29:21,160
Speaker 1: analyst for Wood McKenzie, told me that it's going to

537
00:29:21,200 --> 00:29:24,360
Speaker 1: be a long battle. Technology is not going to come

538
00:29:24,400 --> 00:29:27,719
Speaker 1: to save us in the shortages that we are facing today.

539
00:29:28,560 --> 00:29:31,600
Speaker 1: It's just going to take years, probably five years before

540
00:29:31,640 --> 00:29:34,320
Speaker 1: we see any of this bottleneck actually be resolved.

541
00:29:34,600 --> 00:29:37,640
Speaker 2: But these are crucial parts of our energy infrastructure, and

542
00:29:37,920 --> 00:29:40,160
Speaker 2: people are not going to be happy if there are

543
00:29:40,160 --> 00:29:44,240
Speaker 2: widespread blackouts across their cities, their countries. Isn't it in

544
00:29:44,240 --> 00:29:46,400
Speaker 2: the interest of governments to step in to get things

545
00:29:46,440 --> 00:29:46,920
Speaker 2: rolling here?

546
00:29:47,120 --> 00:29:49,320
Speaker 1: Yeah, and the industry has been trying to get governments

547
00:29:49,320 --> 00:29:52,280
Speaker 1: to step up. Not all places are willing. As we know,

548
00:29:52,520 --> 00:29:55,760
Speaker 1: government budgets are stretched. They're cutting down eight budgets in

549
00:29:55,760 --> 00:29:59,400
Speaker 1: Western economies, but a couple of countries that we found

550
00:29:59,400 --> 00:30:02,719
Speaker 1: in our reporting have shown how this could be done.

551
00:30:02,880 --> 00:30:07,840
Speaker 1: So Germany is underwriting many of the transformer purchases by

552
00:30:07,920 --> 00:30:12,400
Speaker 1: telling the makers of transformers that look, increasing your manufacturing capacity,

553
00:30:13,000 --> 00:30:16,200
Speaker 1: We'll make sure if this utility here in Germany isn't

554
00:30:16,200 --> 00:30:19,080
Speaker 1: buying it, we the government will buy your transformer, so

555
00:30:19,120 --> 00:30:22,120
Speaker 1: that certainty gives them the ability to actually plan out.

556
00:30:22,520 --> 00:30:26,720
Speaker 1: The other one is Canada, which is also supporting just

557
00:30:26,760 --> 00:30:31,000
Speaker 1: manufacturing sites. That's allowed Hitachi Energy to actually expand a

558
00:30:31,040 --> 00:30:34,720
Speaker 1: Canadian factory while it had to shut down one in America.

559
00:30:34,880 --> 00:30:39,400
Speaker 1: So governments can come into the fray, but reporting the story,

560
00:30:39,760 --> 00:30:42,760
Speaker 1: it's just that transformers that these boring devices nobody thinks

561
00:30:42,760 --> 00:30:46,080
Speaker 1: about unless somebody raises the alarm. And I just don't

562
00:30:46,120 --> 00:30:49,280
Speaker 1: think that alarm has risen high enough at the level

563
00:30:49,520 --> 00:30:52,680
Speaker 1: that governments all around the world are waking up to

564
00:30:52,760 --> 00:30:54,640
Speaker 1: what is a real, real challenge.

565
00:30:55,320 --> 00:30:57,800
Speaker 2: And those are Western countries I want to bring into

566
00:30:57,840 --> 00:31:00,400
Speaker 2: the room China, because China is making leaps and bounds

567
00:31:00,400 --> 00:31:03,800
Speaker 2: in its electrification, are they facing the same problems or

568
00:31:03,800 --> 00:31:07,000
Speaker 2: have they factored in the need for transformers into their

569
00:31:07,200 --> 00:31:08,400
Speaker 2: electricity boom.

570
00:31:08,520 --> 00:31:10,800
Speaker 1: So this is the story of places which have seen

571
00:31:10,920 --> 00:31:13,920
Speaker 1: five to ten percent electricity growth on an annual basis,

572
00:31:14,480 --> 00:31:17,840
Speaker 1: that they don't see the same level of disruption or

573
00:31:17,840 --> 00:31:21,920
Speaker 1: difficulty that Western economies are seeing. So in India's case, yes,

574
00:31:21,960 --> 00:31:24,280
Speaker 1: there has been a little increase in the delivery times

575
00:31:24,280 --> 00:31:27,480
Speaker 1: for transformers, is nothing like the tripling that we saw

576
00:31:27,600 --> 00:31:31,400
Speaker 1: in the US. For example, In China, there is no shortage.

577
00:31:31,560 --> 00:31:34,400
Speaker 1: Is the country that is making enough of them to

578
00:31:34,640 --> 00:31:38,880
Speaker 1: export to other countries. And if Western economies want to

579
00:31:38,880 --> 00:31:42,520
Speaker 1: catch up with China on the race to build AI,

580
00:31:43,080 --> 00:31:46,840
Speaker 1: on the race to electrify their auto sector, they are

581
00:31:46,880 --> 00:31:49,560
Speaker 1: going to have to step up on the Transformer game.

582
00:31:50,440 --> 00:31:51,800
Speaker 3: Actually, thank you very much.

583
00:31:51,760 --> 00:31:59,280
Speaker 1: Thank you, and thank you for listening to zero. This

584
00:31:59,360 --> 00:32:02,320
Speaker 1: is the first step episode in the bottleneckt series. Next

585
00:32:02,360 --> 00:32:05,200
Speaker 1: we'll look at the shortage of skilled workers. Look out

586
00:32:05,200 --> 00:32:07,880
Speaker 1: for that episode in your feed. And now for the

587
00:32:07,920 --> 00:32:16,280
Speaker 1: sound of the week. That's the sound of the inrush

588
00:32:16,400 --> 00:32:20,920
Speaker 1: current into a forty mega volt ampere Transformer or is

589
00:32:20,920 --> 00:32:23,719
Speaker 1: it the sound of Optimus Prime summoning the autobots?

590
00:32:24,200 --> 00:32:26,400
Speaker 3: You decide.

591
00:32:26,480 --> 00:32:28,600
Speaker 1: If you like this episode, please take a moment to

592
00:32:28,680 --> 00:32:31,080
Speaker 1: rate and review the show on Apple Podcasts or Spotify.

593
00:32:31,480 --> 00:32:34,320
Speaker 1: Share this episode with a friend or with someone whose

594
00:32:34,400 --> 00:32:38,200
Speaker 1: kid is obsessed with Transformers. This episode was hosted and

595
00:32:38,240 --> 00:32:41,280
Speaker 1: produced by Oscar Boyd. Bloomberg's head a Podcast is Sage

596
00:32:41,280 --> 00:32:44,080
Speaker 1: Bowman and head of Talk is Brendan Newnan. Our theme

597
00:32:44,160 --> 00:32:48,000
Speaker 1: music is composed by Wondering Special Thanks to Jessica Beck,

598
00:32:48,440 --> 00:32:53,280
Speaker 1: Samersadi Moses Andim and Shawan Widner. Thanks also to all

599
00:32:53,280 --> 00:32:56,360
Speaker 1: the reporters and editors from Bloomberg News who contributed to

600
00:32:56,400 --> 00:33:01,480
Speaker 1: the feature story. Nurine Malek, Tiffany Choi, Olivia Rotguard, Mark chadiak,

601
00:33:01,720 --> 00:33:06,719
Speaker 1: Dan Moutor Somnadbat, Jody Mexin, Emily Buzzo, Aaron Rudkoff, and

602
00:33:06,800 --> 00:33:10,520
Speaker 1: Amanda Colson Hurly, I'm mak Sha Rati back soon