MATHIAS STECK    Hello and welcome to the 13th series of the DNV Talks Energy Podcast. I'm your host, Mathias Steck. During this series, we’ll be exploring some of the key insights from DNV’s Energy Transition Outlook, our annual independent model of the world's energy system, and what they mean for the future of our planet. Across the series, with the help of leading industry guests, we’ll shed light on what's happening right now and the forecast as we move forwards. We’ll explore topics from the geopolitical developments affecting the energy transition to what's needed from technology, finance and policy in delivering net zero. Crucially, we ask - how do we move from ambition to urgent action over climate change?

With fossil generated power decreasing, renewables are projected to dominate the electricity system by 2050. In this episode, we look at how electrification and smart technologies are revolutionizing the energy system and the infrastructure needed to accommodate the volume of green power being produced. To discuss this, I’m delighted to be joined by Fraser Thompson, co-founder and Chief Strategy Office of Sun Cable – a company building one of the largest solar farms in the world.

Welcome to the DNV Talks Energy Podcast, Fraser, it's great to have you with us today.

FRASER THOMPSON    Thanks for having me, Mathias.

MATHIAS STECK    For the benefit of our listeners, it would be great if you could share a little bit about yourself, your experience and your role at Sun Cable.

FRASER THOMPSON    Sure, very happy to. I'm originally from Australia. I - ah, background as an economist,  actually, for my education. I spent about a decade at McKinsey & Company doing a range of sustainability work. And then, together with my co-founders, David Griffin and Mac Thompson, we started Sun Cable back in 2017.

MATHIAS STECK    So we will talk about Sun Cable’s work a bit later, Fraser. But before we do this, I would like to take the broader picture. DNV has published an Energy Transition Outlook and in that we find that grid-connected electricity supply is expected to increase threefold from 2020 to 2050, firmly establishing electrification as the backbone of the energy transition. Why is electrification so important?

FRASER THOMPSON    So, electrification and grid integration is crucial for a few reasons. It's crucial for resilience of the energy system. It's crucial for lowering the cost of the energy transition and particularly the amount of backup that's needed. But in the Asia Pacific context, it's particularly crucial, quite simply because the biggest demand centers for renewable electricity are not where the most abundant low cost renewable electricity is located. And that mismatch means that if we fail to connect grids, we're going to have a much more costly energy transition than we otherwise would.

MATHIAS STECK    So, the electricity will not transform only every aspect of the end use we see, but generation will also become greener over the same time. And with the proportion supplied by wind and solar PV rising from 11% now to close to 70% by 2050, what needs to happen from an infrastructure point of view to integrate all these renewables?

FRASER THOMPSON    So, we're going to need a huge investment in transmission infrastructure. We did some research at Sun Cable which looked at where we are in terms of grid integration in Asia Pacific versus elsewhere. And if you look at cross-border electricity in Europe, so 12% of total electricity is traded across borders today and there's a target in the EU for 15% by 2030. And the way that things are tracking, they probably will exceed that target. If you look at the Asia Pacific region, it's 0.3%. So we’re really very nice and it's basically flatlined in terms of cross-border electricity trade.

So it's important recognition that we are just at the start of the journey in the Asia Pacific region. It is also arguably more crucial for grid integration in this part of the world than anywhere else, and for a few reasons. One is that from an economic perspective, this is one of the most dynamic regions in the world: 550 million people move into cities by 2030, a doubling of the consuming class, massive electrification. These are all exciting stories, but it creates huge demand for energy. It also creates a challenge in that most countries don't have scalable, high quality, renewable resources. So we need to make grid integration work.

In terms of the opportunity, as a thought experiment, imagine we could match where Europe is heading in 2030, but do it ten years later in Asia Pacific. That would basically create a market of trade electricity of over 490 billion USD a year, 870,000 jobs, and reduce the emissions equivalent of 8% of global emissions today. So it's a big, big prize worth going towards. The challenge is - where do we start? And one of the big items will be investment. So we estimate that over 100 billion USD will be needed just in terms of transmission infrastructure investment for some of those cross-border links. And that's before you consider all the generation investment and batteries and so forth. So it's a really big number we're talking about. But, you know, we need to get started.

MATHIAS STECK    What barriers do you see for this transition to happen? I mean, the fascinating things you just described and you also describe that there's a different pace, maybe, at different parts of the world. Could you elaborate a bit on this, overall, but also maybe in the regions holding us back?

FRASER THOMPSON    One case example is the ASEAN power grid. So, you know, ASEAN, for those not from the region, that’s one power grid, the ten member states in Southeast Asia. So you've got the massive economies like Indonesia, Thailand, the Philippines, also Singapore is part of that as well. Now, the ASEAN power grid has been under development for a number of years, but there has been frustration at the relatively slow pace of what is happening. Now, if you unpick that and understand - why has that been slow? There's a number of reasons. Some of them are regulatory. So, just harmonizing the different regulatory structures across those member states. But one of the more fundamental challenges is the lack of large-scale available supply of renewable electricity. Most of the countries that have renewable electricity in the region, also have significant demand. And this is the reason why we saw recently that Indonesia and Malaysia have banned renewable electricity exports to Singapore because they've got their own domestic needs that they’re trying to meet.

So this is a fundamental challenge when we think about grid integration - that it presupposes that you've actually got surplus electricity that you can put into that grid. But because of the growth of these economies, that - that premise is often not true. And this is why, from a Sun Cable perspective, we believe that we need to look broader and try to really tap into the largest sources of giga-scale, low cost renewable electricity across the Asia Pacific region, if we're going to make grid connectivity work.

MATHIAS STECK    So you mentioned the lack of high quality renewables generation. You mentioned the challenges with the transmission from the location where the generation takes place to where the load centers are. I think that builds a perfect bridge to describe what Sun Cable is contributing here to solve these issues. Could you describe this to us?

FRASER THOMPSON    Yep, very happy to. So, Sun Cable’s - our mission is quite simple. We transport renewable electricity from where it's abundant and low cost to where there's large demand, but a lack of local availability of supply. Our flagship project is what's called the Australia-Asia Powerlink, and that is building the world's largest solar farm in the Northern Territory of 20GW peak. Then it has a transmission through a railway corridor up to Darwin where we will drop off around 800MW of dispatchable electricity. And then the world's longest undersea cable of 4200km through Indonesia subsea, connecting to Singapore with about 1.75GW of dispatchable electricity available to Singapore. So it's the - it’s, if you like, it's a first in many fronts. It's the first in terms of the largest solar farm, the biggest battery and longest undersea cable. But the economics and the thinking that underpin it are actually quite simple, that you have in Singapore huge demand from datacenters, semiconductors and various other customers that need renewable electricity. And it's gone from a nice-to-have to a license to operate.

Singapore struggles with the fact that there's very few local renewable energy resources. So if you take solar, for example, there is a lot of rooftop solar in Singapore, but because of the cloud cover, you get 31% less electricity per square meter than the same site in the Northern Territory. So, the starting point is harnessing one of the world's best renewable energy resources in terms of the solar in Northern Territory. The second building block is the land. So we have 12,000ha in the Northern Territory. Put that into context, that's about 1/5th, 1/6th the total size of Singapore. We have the potential to supply all of Southeast Asia's 2040 energy demand and would use less than 1% of Northern Territory's landmass. So in a world where we talk about gigawatt scale, land becomes a really crucial constraint. The third aspect that makes this all work is something we don't talk about much in the clean energy transition, that is the high voltage direct current cables.

And this is kind of the silent evolution that's happened. We couldn't have done this project five years ago because, basically, we would have lost too much electricity in transit to make the economics work. But the voltage has been improving over 10% per annum, so now it's far more economic to transport electricity for longer distances. At the same time, we're getting more reliability. So fault rates have decreased by 80% per 100km in the last 20 years, and we're getting more flexibility. So now we can lay cables as deep as 3000m, whereas previously it was very difficult to lay beyond 1200m. So that combination, if you like, of the voltage improvements, the reliability and the flexibility was the final piece in the jigsaw puzzle that needed to unlock a lot of these renewable energy resources that are in different parts of the world.

MATHIAS STECK    So you alluded on some of the fascinating technical features already a little bit. I would like to go a little bit deeper there. What are the challenges in such a project? I can imagine having such a long cable which is producing or transmitting so much energy, there's also a lot of responsibility that there's a very high availability of that link. Because if that's cut, then the whole region falls short of generation. So these kind of things, how is that all covered?

FRASER THOMPSON    Yeah, look, there's a number of technical challenges. And part of it is around not just individual technologies, but how you integrate all those different technologies, from the generation to the storage to the transmission systems. So we actually have A.I. technology that we use to do all these decisions real time. So if our customers in Singapore have a change in their demand profile, then we can instantaneously look about how we have to optimize the cable usage, how to optimize the batteries, the generation to all make this work. So that's a - that's a key part of - of leveraging that digital technologies to make this work.

If you look at the individual building blocks and break them down, you know, when it comes to the generation side, the solar technology, in some ways this is very mature technologies - in many ways. But the area that we get excited about is scale. So a 20GW solar farm looks nothing like a 100MW solar farm. We can do things in terms of automation, optimization of that, which can really drive down the cost. When it comes to storage systems, obviously, there's a broader discussion we can have about lithium-ion flow batteries and so forth. That's an area where we're doing a lot of research to understand what will work at the scale that we need.

And then the final piece which you mentioned is the cable. We spend a lot of time thinking about the cable because that is a crucial piece of this. I mentioned earlier that not only is the efficiency improved, but the reliability of these cables has improved. And to delve a bit deeper into that, you have two types of faults when it comes to a cable, what we call intrinsic or extrinsic. So intrinsic is basically an issue with the manufacturing of the cable. Now, due to the increased growth of the cable industry and professionalization, those have become what we consider non-credible risks. We've really sort of got most of those risks out of that supply chain area, which is terrific. The other set of risks, the extrinsic ones, are basically some kind of external interference with the cable. So in short, you could think about anchors of vessels that interfere with the cable. Now, this is a big issue for fiber optic cables. Fiber optic cables do break a lot easier because they are much lighter and have less armor. But it is an issue for power cables as well. The good news is that we have a lot more sophistication about understanding those risks, that we have modern cable, better risk assessments. We have a lot of things we can do to protect cables, from concrete blanketing to trench digging and so forth, to actually protect those cables through the most vulnerable areas.

So when you put that together, what's interesting is that modern undersea cables, which are well-designed, actually have availability rates which match combined-cycle gas turbines and the existing fleets, and in some cases are better. So, you know, there's a kind of a myth that as soon as we think about a cable, there's a belief that we introduce vulnerabilities to energy security. In fact, that may have been true ten years ago, but the modern cables are quite the opposite.

MATHIAS STECK    Is it a vision, that we get more of these connections here in the region? You do it now with Singapore, but there's quite a few countries on the way: Indonesia, Malaysia is not far. They, of course, have much more space to maybe do that themselves, but it could strengthen the supply and the security.

FRASER THOMPSON    Yes, so look, we hope that this project is the first of many. So we say it's the first of a kind, but it's the first of many, and it will help develop some of the industry in the Asia Pacific. Part of the challenge we have is that we don't have a supply chain in the Asia Pacific, so we lack cable manufacturing facilities, for example. We lack a lot of the key inputs that are needed. So it's not just about building a cable system. It's about building the supporting infrastructure that supplies that.

We're excited about then working with other countries on this. We look very carefully to find where’s the right supply and demand dynamics. As you know, with energy systems, it's partly economics, but it's also partly politics. So you have to see whether the politics work as much as the economics. And often those two are not highly correlated. But we're excited by a number of countries where we think there’s the potential to develop large scale renewable energy.

MATHIAS STECK    So let us take a step back again from that specific solution, but drill a bit deeper on that point you just made. We have other crises other than the energy transition or the climate change crisis at hand, like the crisis or the conflict between Russia and Ukraine, which takes a lot of attention and at least in Europe, has caused an energy security crisis. How much do you see these type of events either accelerating these type of projects or slowing them down?

FRASER THOMPSON    So for us, it's actually been an accelerator. And it's been an accelerator in the sense that if you look at Singapore, for example, it's 95% dependent on gas and most of the LNG contracts. So what happens in the other side of the world has a direct impact on the energy system here and we've seen some of the most volatile prices in history. Now the knock on effect for consumers, large scale consumers of electricity, it's extremely difficult to plan in that kind of environment. So our offtakers, yes, they obviously discuss the price a lot, but they discuss the volatility almost just as much.

So, how do we enter into longer PPAs that can fix a single price and remove that volatility and allow them to plan investment decisions around that? In Asia Pacific, I mentioned it’s a dynamic region, lots of FDI decisions are being planned, but they're predicated on the availability of renewable electricity. And so this crisis in some ways has kind of accelerated those kind of discussions about how do we get things sooner. So if there was one silver lining that comes from the horrible conflict is that it may end up speeding up some of the energy transition, not just in Europe, but also in Asia.

MATHIAS STECK    And then my last question Fraser, would be about your personal opinion. COP27 was last year, and we already had this big understanding from COP26 that the energy transition is an urgent matter, but nothing has happened. So we can't afford this happening now, again. In the race to net zero, how optimistic are you that the commitments made and the targets set are filtered down to players in the industry and even down to maybe citizen level to really drive action now?

FRASER THOMPSON    So it's clear we're not where we need to be. If I put the positive side of things, things are starting to happen. So if we look at - in the Asia Pacific region, we’ve seen the new Australian federal government has come up with a much more ambitious target in terms of climate carbon emissions abatement. Here in Singapore, the government has, just yesterday, strengthened its target for carbon emissions reduction, and committed to net zero by 2050. It's also put in place a pathway to a carbon price of Singapore dollars - 80 dollars a ton by 2030. And these are really important building blocks to the energy transition. So that gives me a source of optimism. But I guess to come back to where we started is that I, I worry that we're not going to get to, in the energy sector, the renewable energy penetration that we need until we sort the grid integration topics. Otherwise, I think we'll find that we'll plateau very quickly or it becomes an unaffordable clean energy transition.

MATHIAS STECK    Fraser gave us a firsthand insight into the fascinating renewable generation distribution project, one of the world's largest of its kind. He provided us with a model for how areas able to produce ample clean energy can supply it to those where resources are more limited. None of this is possible without advancements in grid and cable technology. So, will we see many more projects like this in the future? Join us next time as we delve deeper into the topic of renewable energy and explore the outlook for our clean energy future.

To hear more podcasts in the series, please visit dnv.com/talksenergy.