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