Based on a discussion with Dr Fraser Thompson, Co-Founder, Cyan Ventures, and former Chief Strategy Officer and Co-Founder, Sun Cable, with the members of APAC Sustainability Advisory Council
What if a single initiative could take out 8% of global emissions and create nearly a million jobs in Asia-Pacific? These outcomes can result from cross-border electricity trade among Asian countries to the tune of 15% by 2040. You would expect governments hungry to create jobs and at least moderately worried about meeting their net zero commitments to jump at this opportunity. But so far the progress has been tepid. Currently cross-border electricity trade stands at a meagre 0.3%, compared with Europe’s 12%.
The power of cross-border electricity trade
Why does cross-country electricity trade result in lower emissions? First, it allows renewable energy from surplus areas to flow to the regions where there is a deficit. This allows for investments in renewable energy development in areas that are uniquely suitable for generation of electricity from topography and natural factors’ point of view. Asia-Pacific has 10X the population density compared with the global average. It limits the potential to generate renewable energy, which typically requires 10X the land compared with fossil fuel run plants. Further, such high population density also creates economic dynamism and consequently, higher demand for electricity. The only way to foster economic growth without spiking emissions, is therefore to import electricity from places that have the right conditions to generate renewable energy in large quantity (gigawatt scale) – plenty of land that does not compete with other uses (agriculture, say) or causes (biodiversity) and has the right natural conditions – wind speed and direction or sunlight’s intensity and duration. Northern Territory in Australia is one place, but it is far from the centers of electricity consumption. Sun Cable, an audacious project, was conceived to set up the world’s largest solar farm in Northern Territory in Australia and wheel the electricity to Darwin at Australia’s northern tip through overland HVDC (high voltage direct current) cable and then to Singapore through sub-sea cables. It is an incredibly complex project that just got environmental approvals from the Australian government earlier this week.
The HVDC revolution
HVDC cables are suited for long-distance transmission of power as they are more reliable, and the transmission losses are lower. Recent developments in HVDC technology have made their use commercially viable in large and complex projects like the one Sun Cable is executing. These include voltage improvements (averaging over 10% increase per annum over the past 20 years), fault reduction (80% down over the last 20 years) and the ability to lay them at greater depth in water (3000 meters). This is therefore a unique time in history when improvement in cost-performance of renewable energy generation is matched by the developments in the transmission through HVDC cables.
It comes down to politics (and geopolitics)
However, technology can only go so far. Cross-border electricity flow requires safeguards because energy security is one of the biggest concerns of any government. That is why the destination of Sun Cable’s renewable energy is Singapore, a country with which Australia enjoys a trusted relationship, even though it is over 4000 kms away. Other intra-Asia electricity trade deals will likewise be struck among countries that trust each other. It helps that ASEAN countries have been collaborating with each other on defense and economic matters for nearly 50 years and can conceivably extend it to electricity trade. Indeed, some ASEAN-level initiatives on grid interconnections are beginning to take shape.
Regulatory fog
Given cross-country electricity trade is a nascent industry, it is not surprising that it is beset with several regulatory, legal and taxation issues. For instance, if a cable passes the territorial waters of a country, what is the share of tax it should receive? Who will receive the carbon credits – the generating country or the consuming? Ships of which company would have the right (or obligation) to repair if an undersea cable is damaged?
Asia needs local manufacturing
Apart from Giga Scale power generation projects, and trusted government-to-government relations, Asia will also need local manufacturing of HVDC cable, an industry dominated by European players, and a few Japanese and Korean ones. Growing demand for such projects will create opportunities for local manufacturing, likely in partnership with the European leaders. India is a possible center for manufacturing HVDC cables, given its industrial base and a strong fiber optic cable research and manufacturing capacity.
Clearly, there are several obstacles to be overcome to benefit from the full potential of cross-country electricity trade in Asia. But the size of the prize makes the effort worthwhile and urgent.