June 11, 2025 • 42 mins
High-voltage electricity cables are in huge demand around the world, so much so that a lack of cabling has become a bottleneck throttling the clean energy transition. So why are cable manufacturers so hesitant to expand? Also, how are these giant cables made? And is China about to eat everyone's lunch? Claes Westerlind, chief executive officer of cable manufacturing company NKT, joins Zero to discuss. This is the third episode in Bottlenecks, a series exploring the lesser known obstacles standing in the way of our electrified future.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to zero. I am akstra drati this week cables,
cables everywhere. Have you ever thought about how electricity gets
from where is generated to your home or to your office.
(00:23):
How when you flick a switch to turn on the lights,
the electricity just works. It's a form of modern day
magic that electricity runs through a series of cables. The
ones in your home running from your bedside electricity socket
into your phone are thin, just a few millimeters thick.
The ones connecting your building to a nearby transformer a
(00:46):
little bit thicker, and the ones connecting countries traveling hundreds
of kilometers across the seafloor are enormous. How big is
that cable?
Speaker 2 (00:57):
Yet? Diameter wise you would say that perhaps it's twenty
five centimeters in diameters.
Speaker 1 (01:04):
So I could literally be hugging.
Speaker 2 (01:06):
A cable, absolutely, both literally and metaphorically. Definitely yes, Oh wow.
Speaker 1 (01:14):
My guest today is Klau's Westerland, CEO of cable manufacturing
company n KAT, headquartered in Denmark and with manufacturing facilities
across Europe. NKAT is one of a handful of companies
that designs and builds these highly sophisticated high voltage electricity
cables that connect our world, and right now their products
(01:36):
are in huge demand, so and so that a lack
of cabling is considered a huge bottleneck to building the
clean energy transition. This week on Zero I go deep
with Klaus on the cable industry. How are these giant
cables made with so much demand? Why are cable manufacturers
so hesitant to expand? And is China about to eat
(01:56):
everyone's lunch. This is the third episode in the Botto
Next series. If you haven't listened to the first two,
please check out those episodes on the shortage of transformers
holding back electrification and the shortage of skilled workers holding
back the energy transition. Klaus, welcome to the show.
Speaker 2 (02:14):
Thank you.
Speaker 1 (02:15):
So Nkaty makes low, medium, high voltage cables to move electricity,
and you've been doing it for more than one hundred years.
Could you just start by explaining what goes into making
these cables and how do those differ based on the voltage.
Speaker 2 (02:30):
Yeah. First, let me just say I'm pleased to be
here today, so very much looking forward to our conversation.
And as your question suggests, they are a little bit
different the types of cables that we make. What is
common for all of them is that they do transport electrons.
They do transport electrons from where they are generated to
where they are consumed. But if we start with the
(02:52):
maybe perhaps the most highest voltages cables that are in
essence part of our transmission grids across the globe, they
tend to look simple when you look at them. A cable.
I've come to appreciate and learn over the years that
it is significantly more complex than what just meets the
eye when you see these cables. Part of the complexity,
(03:13):
of course, is that if you look at a very
high voltage direct current cable able to carry roughly to
gigawatt through two pairs of cables, that means that the
equivalent of one nuclear power reactor is flowing through one cable.
And while it's doing that, you can also put your
hand on the cable. And that has to be a
(03:33):
product that can sustain a lot over the thirty years
or forty years lifetype that these cables are in service for.
So how do we then make them. At the center
of the cable is the conductor. Conductor is made of metal.
It can be of aluminium, it can be of copper,
and the role of the conductor is to carry the
electrons through that. The conductor you make basically in the
(03:58):
same way that you make a rope, so you twist
and turn metal wires or profiles together so that they
constitute a rope. Of of course, a much finer measure
than when you think about an ordinary rope, but yet
very similar. On top of the conductor we place what
we call the insulation system, and this is in the
cable world. That's the heart of the cable system. That
(04:21):
is the layer in the cable that gives its wedstand
capability so that you can put your hand outside the
cable while a lot of power is flowing inside the cable.
Basically you aret you avoid to get an electrical show.
This is being applied on the conductor for the larger
cables in what we call an extrusion tower. So it's
typically a very high building. I'm sitting and speaking to
(04:44):
you from Cosgrona and Sweden, where we have three towers,
the highest tower being two hundred meters above ground. So
the tower that we have here is the second highest
building in all Nordics, so that gives you an appreciation.
It's not a small building, and the cable goes up
into the town. In the top of the tower, we
are dressing it with three different layers of installation, and
(05:05):
we do that vertically because mother Earth otherwise would try
to make the cable oval instead of round, and we
need to have a perfectly round cable to be able
to sustain all the power within. On top of that,
and you can hear it is more complex than what
meets the eye. We do a process treatment of the
cables to get the right properties or residual products out
(05:27):
of them. We add sheets that will make them water
resistant so that you can lay them in our seas.
And we also mechanically armor the cables, so basically putting
wires around the cables to make them mechanically robust both
to be handled during installation, but also to be resilient
when they are at the bottom of our oceans or
(05:47):
wherever they are going.
Speaker 1 (05:49):
Well, that is a lot of complexity for what looks
like a simple idea just to be able to move
electricity through a conductor from one end to the other end.
And I want to break down those steps a little bit.
So let's do that first and then come to the
business side. You said, at the core is the conductor
could be copper, could be aluminium. But you also said
(06:09):
that it is made like a room, so it's not
a solid piece of metal. It's many wires joined together
and twisted like a rope. Why is that the case.
Speaker 2 (06:19):
Yeah, typically you can also have solid conductors, but solid
conductors you would have for smaller power rating of cables.
And the simple reason is that the mechanical properties of
a solid conductor, it becomes very sturdy, very firmed, very fixed,
so it will become difficult to handle the cable itself
with a solid conductor, and that is why you would
(06:40):
move to what we call compacted conductors out of wires
or even profiled conductors. And it's basically just a lot
of different wires being strung together into one large conductor.
So if you look at it, it almost looks like
a solid metal surface, but in actual fact that it's
comprised out of a couple of different layers of wires
(07:02):
or profiles.
Speaker 1 (07:03):
And then you said you have to have these cables
go in this large two hundred meter tower because if
you don't, the quoting that you're going to put on,
which is the insulation which is going to make the
cable safe will become oval rather than round. What does
that mean in essence?
Speaker 2 (07:22):
And of course you can do it in smaller towers.
But let's say that you would do it in a
horizontal manner. So you spray plastic on or you squeeze
plastic on, and we do it in three layers, so
it's even more complex than only one layer. But for
the simplicity reason, if you just spray a layer of plastic,
then the gravity of Earth will of course try to
(07:42):
pull as much as this can, so that before you
get mechanical sturdy or fixed insulation layer, it will tend
to be oval in shape, just like a water drop
somehow is also affected by gravity. So while if you
do it vertically and then we heat the cable after
it gotten it plastic around itself, then the material we
(08:03):
call it it cross links, so it becomes mechanically fixed.
And after that process that we are then cooling the
cable also for a a fine period of time, and
at the end of that process then it is mechanically stable.
So then you can put the cable horizontally without the
cable deforming or changing its shape.
Speaker 1 (08:23):
And you talked about making cables for different voltages. You explain.
I think the cable that you make for high voltages,
what is the difference with lower voltages. Is it just
the layers of insulation are smaller and the cable is smaller.
It's just just a shrunken version.
Speaker 2 (08:39):
Yeah, in essence, I mean, I guess if you oversimplify,
you can say yes. But there is also even more
simplicity to lower power cables. If you compare these very
large cables being able to integrate an offshore wind farm
or a nuclear power station or whatever it may be,
with a cable or what I would call who comes
from the large cable word a cord, not that you
(08:59):
have in the walls of your house. That cable will
only basically effectively have two layers, or perhaps three layers.
It has a conductor in the middle, being a copper conductor,
which is solid in its nature to your earlier point,
and then it has its jacket and insulation on top
of that, so like a small plastic layer. And then
you put three or four small of these cords together,
(09:22):
and then you put a jacket around it, and that
will give you your what we call building wire. And of
course the process and speed to make such and also
the inherent allowed variance. Also in terms of quality, et cetera,
it is much much higher than when you look at
the very high voltage cable. If you go back to
the first cable I mentioned, if you have that cable
(09:44):
and you get an eyelash, for example, in that critical
insulation layer, you will immediately have a breakdown. So then
that means that the power of the nuclear reactor will
immediately find its way right through the insulation layer and
right into the ground and thereby maybe putting a city
out of its power or you know, causing a major
grid disturbance.
Speaker 1 (10:05):
Now, before we go into understanding the business side, there's
one other technical aspect of this which most people don't
think about, which is our grid works on alternating current,
which means the power you sense is actually going back
and forth. The voltage is increasing and decreasing. But increasingly
(10:25):
we are also using high voltage direct current for transporting
electricity very long distances or from offshore on to on shore,
and you make cables for both. Can you explain what
is the difference between a high voltage AC cable and
a high voltage DC cable.
Speaker 2 (10:42):
Yeah, from the outset of it, it's quite simple. So
a DC cable typically, or a DC cable system will
have two cables. It will have one cable where the
current goes in one direction and another cable where the
current goes in the other direction. So it is in
essence only a single phase system, if you will, whereas
an AC cable it is part of an alternating current system,
(11:04):
as you rightfully said, and in modern society we have
a three phase system, and that's to avoid to be
having a ground cable. So our three phase cable systems,
they are basically three cables put into one big cable.
If you look at our C cables, there is also
other differences in it, so it's a different type of
(11:25):
material that you use for the insallation system in an
AC cable, respective DC cable system and DC by all
means and measure are also more complex cable to manufacture
because the field is constant over time, so you always
only have a plus and a minus and it will
never vary over time, whereas in an AC cable, as
(11:46):
you said, you know fifty times per second, you know
it varies all the time. And that also has the
bearing when it comes to fields building up inside the
cable system. So if you have an impurity. As an example,
in a DC cable system, the effect of that impurity
will increase over time because the field is constant, while
in the AC cable you may get away with a
(12:08):
little bit more impurities because of the field is always alternating,
so going up, going down, going up and going down,
you're charging and decharging the cable.
Speaker 1 (12:16):
So coming to the business side, then how are you
seeing the field evolve when it comes to high voltage
AC versus high voltage DC.
Speaker 2 (12:26):
The field that we are active within is of course
a fairly conservative field, so that the field of power
transmission and just the whole grid in society is a
conservative field. AC has been with us for more than
one hundred years or a round about that. The DC
technology as such was in fact invented by MKT or
(12:47):
the legacy parts of MKT back in nineteen fifty four.
Was the first DC cable. Then it was with paper
as insulation system drained in oil. And we claim our
first reference, which we are of course super proud of,
to the island of Gotland which is in Sweden, and
to the mainland. Later on in the end of the
nineties we also invented the excelpees of the plastically insulated
(13:10):
DC cables, and ironically again we had the first reference
on the island of Gotland with that. But that's just
to give you that both technologies had been existing for
a long time, one for about one hundred years and
the other one for about seventy years. Yet the big
shift in society where DC has really become much much
(13:32):
more prevalent in terms of use has only come, I
would argue, perhaps in the last five to ten years.
So it has been increasing over time, but the massive
volume applications of the HVDC cables have really started to
kick off from twenty to fifteen and onwards, and today
if you look at the big product masses which are
(13:52):
being awarded, I would say that eighty to ninety percent
are based on HVDC technology as a host to AC.
Speaker 1 (14:01):
And why is that? Why is it that DC is
getting an upper hand now and is the area of
rapid growth.
Speaker 2 (14:10):
There are a couple of different factors that contribute to
it's changed. One is of course the inherent not issue,
but the inherent disadvantage when it comes to power and
length of transfer capability with AC, so an AC cable
as the current is going back and forth, and the
cable as such is like a capacity, almost like a battery.
(14:32):
So in addition to transporting electrons from one side to
the other transporting power from one side to the other,
you also have to charge and discharge the cable all
the time. And that means that if you have a
very long AC cable, you have to do a lot
of charging, and you're ending up just charging and discharging
the cable instead of actually transporting electricity from one end
(14:53):
to the other. And that puts a physical limit for
how long distance you can use AC cables for. Every
depends on the power rating, et cetera, but you can
think about around one hundred kilometers if you want to
do large scale power transfer, that's what you can do
with AC cables. Everything above that or with a very
much higher power rating, then you need to go DC
(15:14):
because there you don't have to charge and decharge, and
on top of that, the DC also will offer you
significant less losses. It's also more advantageous in the grid
because you will also have an inherent capability to control
the power flow much much better to do emergency support
if the grids are in a constrained situation. You can
(15:35):
even with DC systems today do high landing or what
we call black start to start up a grid that
is completely dead or that has suffered a massive failure
through these DC cables and the DC converter stations. And last,
but not least, of course, the other angle, which is
also contributing to this major change is just also the
(15:55):
fact that the any D transition for the last ten
years has now really really taken off. While this has
been a niche industry that a few of us have
really been in love with, I think now the realization
has come by society in general and by the world
in general, how fundamental electrons are for our modern way
to sustain life, and us making these systems more resilient,
(16:20):
us also taking care of our climate and you know,
making sure that we will have also a world to
handover to our kids. Has put much more focus on
you know, both solar power, offshore wind power, any the
trading between countries as well, and that also has increased
the demand. And then the last part, which I think
personally is quite sad, but also the recent amount of
(16:41):
conflicts in the world have also raised the awareness around
security around these kind of grids, and of course with
that also putting cables instead of overhead lines makes you
also more resilient towards potential easy tempering or attacks, etc.
But also just that hardening of the grid and making
(17:02):
the grid more resilient through more investments in the grid
is very very important these days also considering the security situation.
Speaker 1 (17:14):
We'll be back with more of my conversation with Klaus Westerland,
CEO of NKAT after this short break. And Hey, if
you're enjoying this episode, please take a moment to rate
and review the show on Apple Podcasts and Spotify. Your
feedback really matters and helps new listeners discover the show.
Thank you. You also build projects that are on the
(17:41):
ground and under the sea. Is there a difference between
the cables that go on the ground versus under the
sea and what is the difference?
Speaker 2 (17:48):
Yeah, there are a couple of important differences. What is
very specific for a cable that is to be put
under the sea is the fact that it will be
submerged and exercised to high pressure from a water perspective.
So with that, it is very critical that the conductor
is water tied from a longitudinal perspective, so that if
a cable will be torn by an anchor or you know,
(18:11):
physically tempered with. Then you don't want the water to
ingress alongside the cable to destroy a large part of
the cable. So that's what's one aspect. The other aspect
is that it's very critical that it's also water tight,
from a radial perspective, that water cannot get into the
cable from the surface. And then lastly, from a physical
(18:31):
integrity perspective, a cable that needs to be installed below
seabed has to be physically more resilient than a cable
that to be installed in land. For many different reasons,
but the obvious one is, of course, if you are
to hang a cable from a ship one hundred meters
down to the sea bottom, or why not six hundred
(18:51):
meters or one thousand meters or even over and beyond,
then the cable needs to be able to sustain its
own weight down There will also trench the cable so
to bury the cable underneath the seabed. And these trenchers,
you know, they would look like for a normal person,
like like a monster, like a sea monster, like a
big tank that runs on top of the cable on
(19:13):
the bottom fount and the sea bottom floor, and the
cable of course has to be also sustained to be
handled and buried underneath the seabed. So I think these
are the typical differences from a manufacturing perspective. You also
manufactured them in much much longer lengths, so a land
cable there you're limited by also transportation onshore. So you
(19:35):
cannot take a drum that weighs five thousand tons on
a normal road. There is no truck that can carry it.
There is no road that can carry it. So typically
a normal cable drum will entail about a kilometer of
cable and perhaps way you know, everything between fifty and
I think our heaviest drums are up towards one hundred tons,
but that's what the limit is. If you look on
(19:57):
sea cables, on the other hand, they are being spooled
from the factory directly onto one of our cable a vessels,
and there you can load ten thousand tons of cables
in one go on a vessel, or like our new
vessel that we are now manufacturing, she will be able
to carry twenty three thousand tons of cables in one go,
which is very different of course to fifty two hundred tons.
Speaker 1 (20:19):
And that's why you and your competitors like Nexan's Prismian,
these companies build these manufacturing facilities, these huge towers close
to deep water ports, so you're able to make the
cable and directly load it onto a ship. But tuck
me through the cost now, because obviously the cable going
(20:41):
under the sea needs to have all these extra properties
and that requires extra effort. But then they're easier in
a way to move and then to deploy because you're
not having to deal with the challenges that come with
land deployment. So on a per kilometer, how much does
(21:01):
it cost to lay down a undersea high voltage DC
cable versus and ground high voltage DC cable.
Speaker 2 (21:10):
It's a good question. You know. The lawyers would always
tell you it depends so that they cannot give you
a straight answer, and I'm afraid I would have to
resort to the same kind of answer here. And the
reason is, of course that the designs of these cables
will always be different from case to case. But what
you have to keep in mind for onshore cables and
offshore cables, they are solving a completely different task. So
(21:32):
a C cable, it's solving a task that a land
cable cannot solve. So that's why it's difficult to compare them.
It's like comparing the task of a you know, a
normal car with a case of maybe a truck. They
are solving two different tasks. I think what you could
compare is, of course onshore cables versus overheadlines, you know,
because they are solving a similar task, and there are
(21:53):
differences into that. But when it comes to a c cable,
there just isn't any other solution for it. Now that
being said, a sea cable is obviously more expensive than
a land cable, that's clear, but it's not significantly more expensive,
so it's not three times more expensive or something like this.
And this goes to the fact that the conductor and
(22:16):
copper is something which is perhaps the most expensive and
precious part in a cable as such, and if you
make the conductor the same, the majority of the cost
base is the same. And then of course there are
layers that you need to add on the sea cable,
such as steel armoring versus just a plastic jacket on
an on shore cable, where the costs are pretty different.
It's not fair to compare them. Just like by like
(22:38):
because they're solving different problems.
Speaker 1 (22:40):
But one thing you can do is put a dollar
number on it, and roughly a million dollars a kilometer
is a number that gets quoted quite a bit when
it comes to having high voltagityc cables being deployed. Is
that a good range, even if you don't have exact figures?
Speaker 2 (22:57):
Yeah, I think you know the numbers you find out there,
I think you can use them, and you know, as
some sort of an approximation. I would be careful, knowing
a little bit about the industry, to use it to
provide some sort of an exact indication of what it
will cost to solve a certain problem.
Speaker 1 (23:13):
Is there a range that you would advise to somebody
who's considering a project, Now, I.
Speaker 2 (23:18):
Would say that I think that's that's also a part
of this industry, Like standardization. You could think about why
don't be standardized cables to get exactly what the question
that you ask here? So what's the cost per kilometers?
Let's make it simple? But the reason is that doesn't
make sense to do it is, of course, if you
can save just you know, two hundred grams of copper
for every meter of cable and then you multiply that
(23:41):
by seven hundred kilometer, or you know, connecting Singaport to
Australia multiplied by three and a half thousand kilometers, it's
always worth it. So that's why this industry it's all
about customization. Every cable we make from a high voltage
perspective is purpose designed, purpose tested, purpose built to solve
(24:01):
exactly that job. Because the amount of megawats to be
transferred are different, but also the soil compositions are different,
the landing points to onshore is different, and it all
speaks into the thermal properties and just the power ratings
being different, and therefore the cost of the system will
become very, very different.
Speaker 1 (24:19):
But then this is creating a bottleneck in electrification, right.
We've heard from customers that being able to get cables
for these projects is a hard challenge. Many of these
factories have been booked out for years altogether to be
able to build these cables for those specific applications. So
how do you resolve that bottleneck? How do you scale
(24:42):
up this industry if you're going to stick with having
these custom built cables.
Speaker 2 (24:47):
Yeah, I think this is an excellent question, and it's
a question also that I've been privileged to be asked
by member states of the EU, also by the EU Commission,
and there is a lot of the discussions and debates
also with Europe Cable with a cable association where we
organize ourselves. And I think we have a responsibility as
the industry to increase capacity to meet the raising demand
(25:10):
if you look at IA and what they are forecasting
between now and twenty forty, to be able to fulfill
the visions or the political targets and ambitions when it
comes to clean energy or just energy society in general,
and also to refurbish whatever needs to be refurbished in
the existing grid. IA estimates that we need to build
(25:32):
an equivalent of eighty million of kilometers of grid infrastructure
between now and twenty forty. Now, how much is eighty
million kilometers? That's basically the equivalent of the entire existing
grid that we need to build in fifteen years. That's
equivalent to what we have built in one hundred years.
So I agree to your point that the need, the
demand of grid infrastructure is massive. What have we then
(25:54):
done as an industry? I can say what we have
done as a company, just taking the last two years
that I have been privileged to be the CEO of MKTOF.
We have committed and launched investment equivalent to one point
eight billion euros into extending our capacity. This is extending
our capacity for high voltage DC cables, it's extending our
(26:15):
capacity for high voltage AC cables, for medium voltage cables,
so it's across the span the industry in Europe when
it comes to high voltage cables, have announced investments for
roughly about four billion euros so to increase the European
capacity to sustain and increase the demand as such. So
I think in our opinion we have made significant investment
(26:38):
from twenty twenty to day and we are still on
that investment journey now. We have been able to do
that because of society has also taken a step forward
with the transmission system operators in Europe backed by the
regulators also being able to give us a better predictability
in the demand needed going forward. Because of course, as
(26:58):
you can appreciate, for a company like us to do
investments in the realm of one or two billion euros,
it's a massive commitment. It's a massive amount of money
that we are spending. But it's also a massive amount
of demand that is needed for this investment to actually
makes financially sense over the next not five years, not
ten years, but over the next twenty to thirty years.
(27:19):
So we have gotten better visibility, we have gotten some
larger frame volumes, and I think for us to be
able to sustain these investments or maybe even to make
even further investments, this is exactly what we need, a
predictable and safe and sound demand in Europe for these
kind of products and system because the industry has also
(27:41):
learned more than what we wanted to about a decade
ago when we did make investments, but the demand never came.
And expensive as these investments are, it becomes very very
painful then when you are not able to actually produce
cables in them.
Speaker 1 (27:56):
But this is something that comes up again and again
vade different types of device makers when it comes to electrification.
We've written about a shortage of transformers in especially Europe
and America, and it's the same point that manufacturer series,
which is we see there is demand, but we don't
know if there is guaranteed demand for us to be
(28:18):
able to make the investment. How can both things be true?
Because if you can see the demand, how much more
guarantee do you need to be able to make the investments.
Speaker 2 (28:27):
I think for us, as I said, we made a
learning ten fifteen years ago where we did make investments
based on the anticipation of demand, and since the demand
didn't come, we had a utilization problem, which was very
expensive learning for the industry. But I think I want
to give credit. I want to give credit to the
member States, at least some of them. I want to
give credit to some of the tsos who have actually
(28:50):
dared backed by the regulator to make anticipatory investments, so
to make commitments to companies like NKT we will buy
cables from you. We don't know exactly for what project,
exactly what design, but we will buy projects over the
pig course of maybe five years or ten years, and
that gives us enough comfort to dare to take a
(29:11):
step forward and also take a risk. Then, so I
think that part of anticipatory investments, to make commitments that
we will use roughly this much capacity for the next
ten years. That gives us enough And of course, going
back to IA from a global perspective, we all know
it has to be done, and of course when it
(29:31):
comes to grid infrastructure and generation in general, these are
large investments. They are very expensive investments. So also the
governments have to have a part in also enabling these
anticipatory investments and then making it possible for the tsos
to actually carry forward with them.
Speaker 1 (29:49):
So we are starting to see investments from cable makers,
including yourself, But we are seeing Japanese cable makers coming
into Europe. We are seeing South Korean cable ma going
into the US. The country that has deployed the most
amount of high voltage DC cable is China. Are you
worried that Europe and the US are losing the ability
(30:14):
the competitive edge to China when it comes to electrification
in general.
Speaker 2 (30:19):
I would maybe nuance the statement. I think maybe China
has has launched or built the most amount of HVDC
line kilometers potentially but not necessarily cables, so insulated cable systems.
Am I worried in the way that we in the
Western world have interacted with China in the past with
respect to technology ownership, with respect to allowing them to
(30:42):
act freely in our markets, while we have been locked
out of theirs with respect to them being allowed to
tender and win and execute products which are obvious on
unreasonable price and cost levels, so hence with the risk
of being subsidized. Yes, I think the Western world and
Europe in particular, we have been a little bit too
(31:06):
naive in the past around this topic, and that of
course has also then allowed them to gain quite a
bit of ground. I would not say that from an
HVDC cable perspective, they are close to where we are.
But then, if I want to be turned a little
bit positive, I think if we have learned anything now
for the last one two years under very tragic circumstances,
(31:30):
is the fact that strategic autonomy is very important. It's
very important when it comes to the core parts and
the fundamental parts of your society where the grid backbone
is one. And we talked earlier about electrons meaning for
our modern way of life, etc. And there I see
a very different sentiment today in Europe, and I would
(31:53):
imagine just the same without being an expert on the US.
You know, with respect, how much do we want to
make make ourselves dependent on foreign states very very far
away for the most noble, and you know, the spinal
and backbone parts of our society being the backbone grid
because things can happen. You know, whom was your friend
yet yesterday is not necessarily your friend today. And you
(32:16):
just need to make sure that we can feed ourselves,
that we can have heating at home, et cetera. So
I think that there has also been a little bit
of change in insight and reflection.
Speaker 1 (32:25):
Can you give examples of projects that you are proud
of and perhaps projects that you lost to a Chinese competitor.
Speaker 2 (32:32):
You know, happily on the HVDC side, we haven't lost
any products to them because they are simply not there
from a technical perspective where we are. So I think
that in that that high end of the product range
they are not present. We have seen from a distance
where they have won AC cables, you know, one hundred
and fifty five KB, so so much much more standardized
(32:54):
technology levels, and there they have shown extreme aggressiveness in
terms surprising and it is for some you know, and
of course maybe not in the opinion of a court,
but I think in the opinion of myself and many
of our competitors, it's obvious that price dumping is being
used as one of the leavers to really get in
and buy your way into a market. But luckily we
(33:16):
haven't met them head on in these very very noble,
high end products, partly because they're not there technically, but
partly because also slowly insight is actually striking society that
we have to think twice before we put this very
critical infrastructure in the hands of foreign states far away.
Speaker 1 (33:36):
And what are the projects that you are very proud
of Here.
Speaker 2 (33:39):
You keep me going for a long time, I have
to say. Right now, NKT is installing cables in the
United States of America coupling Canada down to the city
center of New York, so through Lake Champlain, through the
Hudson River, through the Harlem River, and the cable is
terminating in a storia right on the other side from Manhattan.
(34:00):
This is a cable system that will carry more than
the equivalent of a nuclear reactor of clean hydropower coming
from Canada, feeding the city center of New York, a
cable that will turn on and a system that will
be used starting next year. So twenty percent of New
York City's power consumption will come through this cable from Canada.
(34:21):
And this is through the hands of the technology developed
by NKT and produced and nurtured, engineered, and tested in Cascrona,
you know, a very small city in Sweden. That's something
that we are immensely proud of.
Speaker 1 (34:35):
But these days you can't get away from geopolitics. There
was a risk at one point when the trade war
was heating up between the US and Canada, where Donald
Trump was demanding that Canada become the fifty first date
that Doug Ford, who's the Premier of Ontario, said, we
will stop sending you power from Canada if you do
(34:57):
not back down. Not to stick to the specific example
because things have sort of resolved for now, but in general,
with the work that you're doing where there'll be cross
border transport of electricity in increasing amounts, how do you
think about the geopolitics of energy transport specifically when it
(35:18):
comes to electricity.
Speaker 2 (35:19):
I think it's a it's a very good reflection and
it's of course something that will impact the company like KT,
it will impact the world, etc. And let me say
start by saying that conflicts and trade barriers it's not
good for business just in general period. That applies to
all companies and all countries. Now, with that said, we
are a non political organization of course, Also we are
(35:42):
you know, a humble technology provider if you allow the expression.
But I would also say that cross border electricity trading
and just being interconnected from a grid perspective, it's just
from a physics perspective necessary for the grid to be
able to operate in the stable matter and physics maybe
(36:02):
is one of the few things that even Trump's politics
in a sort of way. Now. I think one of
the big paradox in our industry is the fact that
any of these systems are designed, constructed, and operated with
decades in mind from an horizon perspective. Politicians, on the
(36:23):
other hand, are elected on a four year term basis,
and of course they have to gather votes, they have
to get re elected, and they have to do what's right,
you know, during you know, with the wins that are
in force at that moment in time. And I think
this paradox between the two is a difficult one. And I,
you know, sadly also think that that's why sometimes we
are also not making the best decisions for for example,
(36:46):
for a specific discipline like the anergy system, or you know,
how should we operate the world in five, ten, fifteen years,
simply because that does not get you votes. And I
think there is no way around this paradox. But I
would just again from a humble technology provider perspective, of
course we see that when it comes to any d policy,
if there was one point which deserves you know, by
(37:10):
parties and agreements or like in Sweden, you know, cutting
across the different blocks and the same thing in Europe.
I think it really is the energy system because there
you need to have the long, long term strategies in
mind when you're making the decisions. But to your point,
is there a risk in this industry because of you know,
political taking decision left and right, changing, rolling back or
(37:30):
rolling forward. I don't think I can be ignorant to
say that there is not. But I think on the
long term, medium to long term, I'm less worried. You know,
the fundamentals of electrons as a way to consume energy,
the fundamentals of electrons as a way to transport energy,
is there so in the medium to long term. Sadly,
with the impact on climate that we are having on
(37:51):
this planet, I think we feel that we are in
a robust industry and we feel strong with the portfolio
and the capabilities we have.
Speaker 1 (37:58):
Well, the robust growth in your store price speaks to
that point. Thank you, Klaus, thank you so much. I'm
now speaking with Will Mathis, my colleague here in London
and the reporter who worked on the story that told
us about the shortage of cables and how it became
a bottleneck.
Speaker 2 (38:17):
I Will Hi Aksha. Thanks.
Speaker 1 (38:19):
You've spoken to Klaus in the past. You also went
and saw one of these massive towers where these cables
are manufactured. But one thing that I am still puzzled
by is if there's such a demand for these cables,
and these companies are minting money, why is it that
they are not able to resolve these bottlenecks more quickly.
Speaker 3 (38:43):
Well, one reason is just that it's very hard to
get into this business. If NKT, Nexon's Prism and some
of the other Asian suppliers that know how to make
these cables don't want to massively scale up, then it's
hard for someone else to get into the business and
start doing it. It's a deep moat, as people say,
(39:06):
that's hard for new companies to start building HVDC cables.
You know these towers, they're weird structures, and if you're
some other business who's never done that before, you're going
to think twice before deciding to build one, and even
if you could find a location and find the materials,
it's just going to be hard to do. So these
(39:28):
companies are investing in new capacity, but they are doing
so very carefully, and they want to make sure that
every dollar they spend that they're going to be able
to profit from for a long time to come.
Speaker 1 (39:39):
But there's a risk with this, which is if it's
a big moat and you have these limited number of
companies making those cables, they can get into price fixing,
which they have done in the past and have been
caught and have been fined as a result. Talk as
to why that scandal happened in the first place and
what could be done to ensure it doesn't happen again.
Speaker 3 (39:59):
Yeah, this is something that really surprised me when I
was researching the cable industry that going back as far
as nineteen oh one, there is documented collusion among cabling
companies in Germany. That behavior basically continued up until pretty
close to the present day. You know, back in twenty fourteen,
the European Union find all the big cabling companies for
(40:20):
collusion and I read through those documents and they're you know,
go around the world and stay at hotels and talk together,
and they basically say, okay, you Europeans, you stay in
your market, and we Asians will go in our market.
And if they got a you know, request for proposals,
then they would let each other know and make sure
that the right bidder one the contract and they've been fined.
(40:45):
And today they would say, you know, that's all in
the past. And I think if you look there, you know,
there's no evidence that's still going on. But if you
look at it, there's kind of no reason to continue coluting.
There is so much demand and constricted supply, so you know,
one of the CEOs I spoke to for the story
(41:06):
asked him, you know, what do you think of competition,
and he said to me, you know, everyone is behaving.
So if everyone is behaving, everyone is trying to keep
prices at a good level for everyone else, there's not
so much expansion of supply, then there's really no wouldn't
be a need toclude even if they wanted to take
that risk.
Speaker 1 (41:26):
Again, thank you Will, and please do check out the
story that Will has written. We'll link it in the
show notes. Thanks Socshean, Thank you for listening. To zero.
This is the third and for now the final episode
in the Bottleneck series. Let us know what you think
of the series and if you'd like us to cover
(41:47):
more of these bottlenecks. Please also take a moment to
rate and review the show on Apple Podcasts and Spotify.
Share this episode with a friend or with your local electrician.
And now for the sound of the week. That was
(42:11):
the sound of a nuclear reactor starting up and producing
what is called charon cough radiation. This episode was produced
by Oscar Boyd. Bloomberg's head of podcast is Saige Bauman
and head of Talk is Brendan newnham. Our theme music
is composed by Wonderly Special Thanks to Will Mathis, Amon Farhat,
Eleanor Harrison Dngate, Samersadi, Moses Andim and Sherwan Wagner. I'm
(42:34):
Akshadrati back soon.
Welcome to zero. I am akstra drati this week cables,
cables everywhere. Have you ever thought about how electricity gets
from where is generated to your home or to your office.
(00:23):
How when you flick a switch to turn on the lights,
the electricity just works. It's a form of modern day
magic that electricity runs through a series of cables. The
ones in your home running from your bedside electricity socket
into your phone are thin, just a few millimeters thick.
The ones connecting your building to a nearby transformer a
(00:46):
little bit thicker, and the ones connecting countries traveling hundreds
of kilometers across the seafloor are enormous. How big is
that cable?
Speaker 2 (00:57):
Yet? Diameter wise you would say that perhaps it's twenty
five centimeters in diameters.
Speaker 1 (01:04):
So I could literally be hugging.
Speaker 2 (01:06):
A cable, absolutely, both literally and metaphorically. Definitely yes, Oh wow.
Speaker 1 (01:14):
My guest today is Klau's Westerland, CEO of cable manufacturing
company n KAT, headquartered in Denmark and with manufacturing facilities
across Europe. NKAT is one of a handful of companies
that designs and builds these highly sophisticated high voltage electricity
cables that connect our world, and right now their products
(01:36):
are in huge demand, so and so that a lack
of cabling is considered a huge bottleneck to building the
clean energy transition. This week on Zero I go deep
with Klaus on the cable industry. How are these giant
cables made with so much demand? Why are cable manufacturers
so hesitant to expand? And is China about to eat
(01:56):
everyone's lunch. This is the third episode in the Botto
Next series. If you haven't listened to the first two,
please check out those episodes on the shortage of transformers
holding back electrification and the shortage of skilled workers holding
back the energy transition. Klaus, welcome to the show.
Speaker 2 (02:14):
Thank you.
Speaker 1 (02:15):
So Nkaty makes low, medium, high voltage cables to move electricity,
and you've been doing it for more than one hundred years.
Could you just start by explaining what goes into making
these cables and how do those differ based on the voltage.
Speaker 2 (02:30):
Yeah. First, let me just say I'm pleased to be
here today, so very much looking forward to our conversation.
And as your question suggests, they are a little bit
different the types of cables that we make. What is
common for all of them is that they do transport electrons.
They do transport electrons from where they are generated to
where they are consumed. But if we start with the
(02:52):
maybe perhaps the most highest voltages cables that are in
essence part of our transmission grids across the globe, they
tend to look simple when you look at them. A cable.
I've come to appreciate and learn over the years that
it is significantly more complex than what just meets the
eye when you see these cables. Part of the complexity,
(03:13):
of course, is that if you look at a very
high voltage direct current cable able to carry roughly to
gigawatt through two pairs of cables, that means that the
equivalent of one nuclear power reactor is flowing through one cable.
And while it's doing that, you can also put your
hand on the cable. And that has to be a
(03:33):
product that can sustain a lot over the thirty years
or forty years lifetype that these cables are in service for.
So how do we then make them. At the center
of the cable is the conductor. Conductor is made of metal.
It can be of aluminium, it can be of copper,
and the role of the conductor is to carry the
electrons through that. The conductor you make basically in the
(03:58):
same way that you make a rope, so you twist
and turn metal wires or profiles together so that they
constitute a rope. Of of course, a much finer measure
than when you think about an ordinary rope, but yet
very similar. On top of the conductor we place what
we call the insulation system, and this is in the
cable world. That's the heart of the cable system. That
(04:21):
is the layer in the cable that gives its wedstand
capability so that you can put your hand outside the
cable while a lot of power is flowing inside the cable.
Basically you aret you avoid to get an electrical show.
This is being applied on the conductor for the larger
cables in what we call an extrusion tower. So it's
typically a very high building. I'm sitting and speaking to
(04:44):
you from Cosgrona and Sweden, where we have three towers,
the highest tower being two hundred meters above ground. So
the tower that we have here is the second highest
building in all Nordics, so that gives you an appreciation.
It's not a small building, and the cable goes up
into the town. In the top of the tower, we
are dressing it with three different layers of installation, and
(05:05):
we do that vertically because mother Earth otherwise would try
to make the cable oval instead of round, and we
need to have a perfectly round cable to be able
to sustain all the power within. On top of that,
and you can hear it is more complex than what
meets the eye. We do a process treatment of the
cables to get the right properties or residual products out
(05:27):
of them. We add sheets that will make them water
resistant so that you can lay them in our seas.
And we also mechanically armor the cables, so basically putting
wires around the cables to make them mechanically robust both
to be handled during installation, but also to be resilient
when they are at the bottom of our oceans or
(05:47):
wherever they are going.
Speaker 1 (05:49):
Well, that is a lot of complexity for what looks
like a simple idea just to be able to move
electricity through a conductor from one end to the other end.
And I want to break down those steps a little bit.
So let's do that first and then come to the
business side. You said, at the core is the conductor
could be copper, could be aluminium. But you also said
(06:09):
that it is made like a room, so it's not
a solid piece of metal. It's many wires joined together
and twisted like a rope. Why is that the case.
Speaker 2 (06:19):
Yeah, typically you can also have solid conductors, but solid
conductors you would have for smaller power rating of cables.
And the simple reason is that the mechanical properties of
a solid conductor, it becomes very sturdy, very firmed, very fixed,
so it will become difficult to handle the cable itself
with a solid conductor, and that is why you would
(06:40):
move to what we call compacted conductors out of wires
or even profiled conductors. And it's basically just a lot
of different wires being strung together into one large conductor.
So if you look at it, it almost looks like
a solid metal surface, but in actual fact that it's
comprised out of a couple of different layers of wires
(07:02):
or profiles.
Speaker 1 (07:03):
And then you said you have to have these cables
go in this large two hundred meter tower because if
you don't, the quoting that you're going to put on,
which is the insulation which is going to make the
cable safe will become oval rather than round. What does
that mean in essence?
Speaker 2 (07:22):
And of course you can do it in smaller towers.
But let's say that you would do it in a
horizontal manner. So you spray plastic on or you squeeze
plastic on, and we do it in three layers, so
it's even more complex than only one layer. But for
the simplicity reason, if you just spray a layer of plastic,
then the gravity of Earth will of course try to
(07:42):
pull as much as this can, so that before you
get mechanical sturdy or fixed insulation layer, it will tend
to be oval in shape, just like a water drop
somehow is also affected by gravity. So while if you
do it vertically and then we heat the cable after
it gotten it plastic around itself, then the material we
(08:03):
call it it cross links, so it becomes mechanically fixed.
And after that process that we are then cooling the
cable also for a a fine period of time, and
at the end of that process then it is mechanically stable.
So then you can put the cable horizontally without the
cable deforming or changing its shape.
Speaker 1 (08:23):
And you talked about making cables for different voltages. You explain.
I think the cable that you make for high voltages,
what is the difference with lower voltages. Is it just
the layers of insulation are smaller and the cable is smaller.
It's just just a shrunken version.
Speaker 2 (08:39):
Yeah, in essence, I mean, I guess if you oversimplify,
you can say yes. But there is also even more
simplicity to lower power cables. If you compare these very
large cables being able to integrate an offshore wind farm
or a nuclear power station or whatever it may be,
with a cable or what I would call who comes
from the large cable word a cord, not that you
(08:59):
have in the walls of your house. That cable will
only basically effectively have two layers, or perhaps three layers.
It has a conductor in the middle, being a copper conductor,
which is solid in its nature to your earlier point,
and then it has its jacket and insulation on top
of that, so like a small plastic layer. And then
you put three or four small of these cords together,
(09:22):
and then you put a jacket around it, and that
will give you your what we call building wire. And of
course the process and speed to make such and also
the inherent allowed variance. Also in terms of quality, et cetera,
it is much much higher than when you look at
the very high voltage cable. If you go back to
the first cable I mentioned, if you have that cable
(09:44):
and you get an eyelash, for example, in that critical
insulation layer, you will immediately have a breakdown. So then
that means that the power of the nuclear reactor will
immediately find its way right through the insulation layer and
right into the ground and thereby maybe putting a city
out of its power or you know, causing a major
grid disturbance.
Speaker 1 (10:05):
Now, before we go into understanding the business side, there's
one other technical aspect of this which most people don't
think about, which is our grid works on alternating current,
which means the power you sense is actually going back
and forth. The voltage is increasing and decreasing. But increasingly
(10:25):
we are also using high voltage direct current for transporting
electricity very long distances or from offshore on to on shore,
and you make cables for both. Can you explain what
is the difference between a high voltage AC cable and
a high voltage DC cable.
Speaker 2 (10:42):
Yeah, from the outset of it, it's quite simple. So
a DC cable typically, or a DC cable system will
have two cables. It will have one cable where the
current goes in one direction and another cable where the
current goes in the other direction. So it is in
essence only a single phase system, if you will, whereas
an AC cable it is part of an alternating current system,
(11:04):
as you rightfully said, and in modern society we have
a three phase system, and that's to avoid to be
having a ground cable. So our three phase cable systems,
they are basically three cables put into one big cable.
If you look at our C cables, there is also
other differences in it, so it's a different type of
(11:25):
material that you use for the insallation system in an
AC cable, respective DC cable system and DC by all
means and measure are also more complex cable to manufacture
because the field is constant over time, so you always
only have a plus and a minus and it will
never vary over time, whereas in an AC cable, as
(11:46):
you said, you know fifty times per second, you know
it varies all the time. And that also has the
bearing when it comes to fields building up inside the
cable system. So if you have an impurity. As an example,
in a DC cable system, the effect of that impurity
will increase over time because the field is constant, while
in the AC cable you may get away with a
(12:08):
little bit more impurities because of the field is always alternating,
so going up, going down, going up and going down,
you're charging and decharging the cable.
Speaker 1 (12:16):
So coming to the business side, then how are you
seeing the field evolve when it comes to high voltage
AC versus high voltage DC.
Speaker 2 (12:26):
The field that we are active within is of course
a fairly conservative field, so that the field of power
transmission and just the whole grid in society is a
conservative field. AC has been with us for more than
one hundred years or a round about that. The DC
technology as such was in fact invented by MKT or
(12:47):
the legacy parts of MKT back in nineteen fifty four.
Was the first DC cable. Then it was with paper
as insulation system drained in oil. And we claim our
first reference, which we are of course super proud of,
to the island of Gotland which is in Sweden, and
to the mainland. Later on in the end of the
nineties we also invented the excelpees of the plastically insulated
(13:10):
DC cables, and ironically again we had the first reference
on the island of Gotland with that. But that's just
to give you that both technologies had been existing for
a long time, one for about one hundred years and
the other one for about seventy years. Yet the big
shift in society where DC has really become much much
(13:32):
more prevalent in terms of use has only come, I
would argue, perhaps in the last five to ten years.
So it has been increasing over time, but the massive
volume applications of the HVDC cables have really started to
kick off from twenty to fifteen and onwards, and today
if you look at the big product masses which are
(13:52):
being awarded, I would say that eighty to ninety percent
are based on HVDC technology as a host to AC.
Speaker 1 (14:01):
And why is that? Why is it that DC is
getting an upper hand now and is the area of
rapid growth.
Speaker 2 (14:10):
There are a couple of different factors that contribute to
it's changed. One is of course the inherent not issue,
but the inherent disadvantage when it comes to power and
length of transfer capability with AC, so an AC cable
as the current is going back and forth, and the
cable as such is like a capacity, almost like a battery.
(14:32):
So in addition to transporting electrons from one side to
the other transporting power from one side to the other,
you also have to charge and discharge the cable all
the time. And that means that if you have a
very long AC cable, you have to do a lot
of charging, and you're ending up just charging and discharging
the cable instead of actually transporting electricity from one end
(14:53):
to the other. And that puts a physical limit for
how long distance you can use AC cables for. Every
depends on the power rating, et cetera, but you can
think about around one hundred kilometers if you want to
do large scale power transfer, that's what you can do
with AC cables. Everything above that or with a very
much higher power rating, then you need to go DC
(15:14):
because there you don't have to charge and decharge, and
on top of that, the DC also will offer you
significant less losses. It's also more advantageous in the grid
because you will also have an inherent capability to control
the power flow much much better to do emergency support
if the grids are in a constrained situation. You can
(15:35):
even with DC systems today do high landing or what
we call black start to start up a grid that
is completely dead or that has suffered a massive failure
through these DC cables and the DC converter stations. And last,
but not least, of course, the other angle, which is
also contributing to this major change is just also the
(15:55):
fact that the any D transition for the last ten
years has now really really taken off. While this has
been a niche industry that a few of us have
really been in love with, I think now the realization
has come by society in general and by the world
in general, how fundamental electrons are for our modern way
to sustain life, and us making these systems more resilient,
(16:20):
us also taking care of our climate and you know,
making sure that we will have also a world to
handover to our kids. Has put much more focus on
you know, both solar power, offshore wind power, any the
trading between countries as well, and that also has increased
the demand. And then the last part, which I think
personally is quite sad, but also the recent amount of
(16:41):
conflicts in the world have also raised the awareness around
security around these kind of grids, and of course with
that also putting cables instead of overhead lines makes you
also more resilient towards potential easy tempering or attacks, etc.
But also just that hardening of the grid and making
(17:02):
the grid more resilient through more investments in the grid
is very very important these days also considering the security situation.
Speaker 1 (17:14):
We'll be back with more of my conversation with Klaus Westerland,
CEO of NKAT after this short break. And Hey, if
you're enjoying this episode, please take a moment to rate
and review the show on Apple Podcasts and Spotify. Your
feedback really matters and helps new listeners discover the show.
Thank you. You also build projects that are on the
(17:41):
ground and under the sea. Is there a difference between
the cables that go on the ground versus under the
sea and what is the difference?
Speaker 2 (17:48):
Yeah, there are a couple of important differences. What is
very specific for a cable that is to be put
under the sea is the fact that it will be
submerged and exercised to high pressure from a water perspective.
So with that, it is very critical that the conductor
is water tied from a longitudinal perspective, so that if
a cable will be torn by an anchor or you know,
(18:11):
physically tempered with. Then you don't want the water to
ingress alongside the cable to destroy a large part of
the cable. So that's what's one aspect. The other aspect
is that it's very critical that it's also water tight,
from a radial perspective, that water cannot get into the
cable from the surface. And then lastly, from a physical
(18:31):
integrity perspective, a cable that needs to be installed below
seabed has to be physically more resilient than a cable
that to be installed in land. For many different reasons,
but the obvious one is, of course, if you are
to hang a cable from a ship one hundred meters
down to the sea bottom, or why not six hundred
(18:51):
meters or one thousand meters or even over and beyond,
then the cable needs to be able to sustain its
own weight down There will also trench the cable so
to bury the cable underneath the seabed. And these trenchers,
you know, they would look like for a normal person,
like like a monster, like a sea monster, like a
big tank that runs on top of the cable on
(19:13):
the bottom fount and the sea bottom floor, and the
cable of course has to be also sustained to be
handled and buried underneath the seabed. So I think these
are the typical differences from a manufacturing perspective. You also
manufactured them in much much longer lengths, so a land
cable there you're limited by also transportation onshore. So you
(19:35):
cannot take a drum that weighs five thousand tons on
a normal road. There is no truck that can carry it.
There is no road that can carry it. So typically
a normal cable drum will entail about a kilometer of
cable and perhaps way you know, everything between fifty and
I think our heaviest drums are up towards one hundred tons,
but that's what the limit is. If you look on
(19:57):
sea cables, on the other hand, they are being spooled
from the factory directly onto one of our cable a vessels,
and there you can load ten thousand tons of cables
in one go on a vessel, or like our new
vessel that we are now manufacturing, she will be able
to carry twenty three thousand tons of cables in one go,
which is very different of course to fifty two hundred tons.
Speaker 1 (20:19):
And that's why you and your competitors like Nexan's Prismian,
these companies build these manufacturing facilities, these huge towers close
to deep water ports, so you're able to make the
cable and directly load it onto a ship. But tuck
me through the cost now, because obviously the cable going
(20:41):
under the sea needs to have all these extra properties
and that requires extra effort. But then they're easier in
a way to move and then to deploy because you're
not having to deal with the challenges that come with
land deployment. So on a per kilometer, how much does
(21:01):
it cost to lay down a undersea high voltage DC
cable versus and ground high voltage DC cable.
Speaker 2 (21:10):
It's a good question. You know. The lawyers would always
tell you it depends so that they cannot give you
a straight answer, and I'm afraid I would have to
resort to the same kind of answer here. And the
reason is, of course that the designs of these cables
will always be different from case to case. But what
you have to keep in mind for onshore cables and
offshore cables, they are solving a completely different task. So
(21:32):
a C cable, it's solving a task that a land
cable cannot solve. So that's why it's difficult to compare them.
It's like comparing the task of a you know, a
normal car with a case of maybe a truck. They
are solving two different tasks. I think what you could
compare is, of course onshore cables versus overheadlines, you know,
because they are solving a similar task, and there are
(21:53):
differences into that. But when it comes to a c cable,
there just isn't any other solution for it. Now that
being said, a sea cable is obviously more expensive than
a land cable, that's clear, but it's not significantly more expensive,
so it's not three times more expensive or something like this.
And this goes to the fact that the conductor and
(22:16):
copper is something which is perhaps the most expensive and
precious part in a cable as such, and if you
make the conductor the same, the majority of the cost
base is the same. And then of course there are
layers that you need to add on the sea cable,
such as steel armoring versus just a plastic jacket on
an on shore cable, where the costs are pretty different.
It's not fair to compare them. Just like by like
(22:38):
because they're solving different problems.
Speaker 1 (22:40):
But one thing you can do is put a dollar
number on it, and roughly a million dollars a kilometer
is a number that gets quoted quite a bit when
it comes to having high voltagityc cables being deployed. Is
that a good range, even if you don't have exact figures?
Speaker 2 (22:57):
Yeah, I think you know the numbers you find out there,
I think you can use them, and you know, as
some sort of an approximation. I would be careful, knowing
a little bit about the industry, to use it to
provide some sort of an exact indication of what it
will cost to solve a certain problem.
Speaker 1 (23:13):
Is there a range that you would advise to somebody
who's considering a project, Now, I.
Speaker 2 (23:18):
Would say that I think that's that's also a part
of this industry, Like standardization. You could think about why
don't be standardized cables to get exactly what the question
that you ask here? So what's the cost per kilometers?
Let's make it simple? But the reason is that doesn't
make sense to do it is, of course, if you
can save just you know, two hundred grams of copper
for every meter of cable and then you multiply that
(23:41):
by seven hundred kilometer, or you know, connecting Singaport to
Australia multiplied by three and a half thousand kilometers, it's
always worth it. So that's why this industry it's all
about customization. Every cable we make from a high voltage
perspective is purpose designed, purpose tested, purpose built to solve
(24:01):
exactly that job. Because the amount of megawats to be
transferred are different, but also the soil compositions are different,
the landing points to onshore is different, and it all
speaks into the thermal properties and just the power ratings
being different, and therefore the cost of the system will
become very, very different.
Speaker 1 (24:19):
But then this is creating a bottleneck in electrification, right.
We've heard from customers that being able to get cables
for these projects is a hard challenge. Many of these
factories have been booked out for years altogether to be
able to build these cables for those specific applications. So
how do you resolve that bottleneck? How do you scale
(24:42):
up this industry if you're going to stick with having
these custom built cables.
Speaker 2 (24:47):
Yeah, I think this is an excellent question, and it's
a question also that I've been privileged to be asked
by member states of the EU, also by the EU Commission,
and there is a lot of the discussions and debates
also with Europe Cable with a cable association where we
organize ourselves. And I think we have a responsibility as
the industry to increase capacity to meet the raising demand
(25:10):
if you look at IA and what they are forecasting
between now and twenty forty, to be able to fulfill
the visions or the political targets and ambitions when it
comes to clean energy or just energy society in general,
and also to refurbish whatever needs to be refurbished in
the existing grid. IA estimates that we need to build
(25:32):
an equivalent of eighty million of kilometers of grid infrastructure
between now and twenty forty. Now, how much is eighty
million kilometers? That's basically the equivalent of the entire existing
grid that we need to build in fifteen years. That's
equivalent to what we have built in one hundred years.
So I agree to your point that the need, the
demand of grid infrastructure is massive. What have we then
(25:54):
done as an industry? I can say what we have
done as a company, just taking the last two years
that I have been privileged to be the CEO of MKTOF.
We have committed and launched investment equivalent to one point
eight billion euros into extending our capacity. This is extending
our capacity for high voltage DC cables, it's extending our
(26:15):
capacity for high voltage AC cables, for medium voltage cables,
so it's across the span the industry in Europe when
it comes to high voltage cables, have announced investments for
roughly about four billion euros so to increase the European
capacity to sustain and increase the demand as such. So
I think in our opinion we have made significant investment
(26:38):
from twenty twenty to day and we are still on
that investment journey now. We have been able to do
that because of society has also taken a step forward
with the transmission system operators in Europe backed by the
regulators also being able to give us a better predictability
in the demand needed going forward. Because of course, as
(26:58):
you can appreciate, for a company like us to do
investments in the realm of one or two billion euros,
it's a massive commitment. It's a massive amount of money
that we are spending. But it's also a massive amount
of demand that is needed for this investment to actually
makes financially sense over the next not five years, not
ten years, but over the next twenty to thirty years.
(27:19):
So we have gotten better visibility, we have gotten some
larger frame volumes, and I think for us to be
able to sustain these investments or maybe even to make
even further investments, this is exactly what we need, a
predictable and safe and sound demand in Europe for these
kind of products and system because the industry has also
(27:41):
learned more than what we wanted to about a decade
ago when we did make investments, but the demand never came.
And expensive as these investments are, it becomes very very
painful then when you are not able to actually produce
cables in them.
Speaker 1 (27:56):
But this is something that comes up again and again
vade different types of device makers when it comes to electrification.
We've written about a shortage of transformers in especially Europe
and America, and it's the same point that manufacturer series,
which is we see there is demand, but we don't
know if there is guaranteed demand for us to be
(28:18):
able to make the investment. How can both things be true?
Because if you can see the demand, how much more
guarantee do you need to be able to make the investments.
Speaker 2 (28:27):
I think for us, as I said, we made a
learning ten fifteen years ago where we did make investments
based on the anticipation of demand, and since the demand
didn't come, we had a utilization problem, which was very
expensive learning for the industry. But I think I want
to give credit. I want to give credit to the
member States, at least some of them. I want to
give credit to some of the tsos who have actually
(28:50):
dared backed by the regulator to make anticipatory investments, so
to make commitments to companies like NKT we will buy
cables from you. We don't know exactly for what project,
exactly what design, but we will buy projects over the
pig course of maybe five years or ten years, and
that gives us enough comfort to dare to take a
(29:11):
step forward and also take a risk. Then, so I
think that part of anticipatory investments, to make commitments that
we will use roughly this much capacity for the next
ten years. That gives us enough And of course, going
back to IA from a global perspective, we all know
it has to be done, and of course when it
(29:31):
comes to grid infrastructure and generation in general, these are
large investments. They are very expensive investments. So also the
governments have to have a part in also enabling these
anticipatory investments and then making it possible for the tsos
to actually carry forward with them.
Speaker 1 (29:49):
So we are starting to see investments from cable makers,
including yourself, But we are seeing Japanese cable makers coming
into Europe. We are seeing South Korean cable ma going
into the US. The country that has deployed the most
amount of high voltage DC cable is China. Are you
worried that Europe and the US are losing the ability
(30:14):
the competitive edge to China when it comes to electrification
in general.
Speaker 2 (30:19):
I would maybe nuance the statement. I think maybe China
has has launched or built the most amount of HVDC
line kilometers potentially but not necessarily cables, so insulated cable systems.
Am I worried in the way that we in the
Western world have interacted with China in the past with
respect to technology ownership, with respect to allowing them to
(30:42):
act freely in our markets, while we have been locked
out of theirs with respect to them being allowed to
tender and win and execute products which are obvious on
unreasonable price and cost levels, so hence with the risk
of being subsidized. Yes, I think the Western world and
Europe in particular, we have been a little bit too
(31:06):
naive in the past around this topic, and that of
course has also then allowed them to gain quite a
bit of ground. I would not say that from an
HVDC cable perspective, they are close to where we are.
But then, if I want to be turned a little
bit positive, I think if we have learned anything now
for the last one two years under very tragic circumstances,
(31:30):
is the fact that strategic autonomy is very important. It's
very important when it comes to the core parts and
the fundamental parts of your society where the grid backbone
is one. And we talked earlier about electrons meaning for
our modern way of life, etc. And there I see
a very different sentiment today in Europe, and I would
(31:53):
imagine just the same without being an expert on the US.
You know, with respect, how much do we want to
make make ourselves dependent on foreign states very very far
away for the most noble, and you know, the spinal
and backbone parts of our society being the backbone grid
because things can happen. You know, whom was your friend
yet yesterday is not necessarily your friend today. And you
(32:16):
just need to make sure that we can feed ourselves,
that we can have heating at home, et cetera. So
I think that there has also been a little bit
of change in insight and reflection.
Speaker 1 (32:25):
Can you give examples of projects that you are proud
of and perhaps projects that you lost to a Chinese competitor.
Speaker 2 (32:32):
You know, happily on the HVDC side, we haven't lost
any products to them because they are simply not there
from a technical perspective where we are. So I think
that in that that high end of the product range
they are not present. We have seen from a distance
where they have won AC cables, you know, one hundred
and fifty five KB, so so much much more standardized
(32:54):
technology levels, and there they have shown extreme aggressiveness in
terms surprising and it is for some you know, and
of course maybe not in the opinion of a court,
but I think in the opinion of myself and many
of our competitors, it's obvious that price dumping is being
used as one of the leavers to really get in
and buy your way into a market. But luckily we
(33:16):
haven't met them head on in these very very noble,
high end products, partly because they're not there technically, but
partly because also slowly insight is actually striking society that
we have to think twice before we put this very
critical infrastructure in the hands of foreign states far away.
Speaker 1 (33:36):
And what are the projects that you are very proud
of Here.
Speaker 2 (33:39):
You keep me going for a long time, I have
to say. Right now, NKT is installing cables in the
United States of America coupling Canada down to the city
center of New York, so through Lake Champlain, through the
Hudson River, through the Harlem River, and the cable is
terminating in a storia right on the other side from Manhattan.
(34:00):
This is a cable system that will carry more than
the equivalent of a nuclear reactor of clean hydropower coming
from Canada, feeding the city center of New York, a
cable that will turn on and a system that will
be used starting next year. So twenty percent of New
York City's power consumption will come through this cable from Canada.
(34:21):
And this is through the hands of the technology developed
by NKT and produced and nurtured, engineered, and tested in Cascrona,
you know, a very small city in Sweden. That's something
that we are immensely proud of.
Speaker 1 (34:35):
But these days you can't get away from geopolitics. There
was a risk at one point when the trade war
was heating up between the US and Canada, where Donald
Trump was demanding that Canada become the fifty first date
that Doug Ford, who's the Premier of Ontario, said, we
will stop sending you power from Canada if you do
(34:57):
not back down. Not to stick to the specific example
because things have sort of resolved for now, but in general,
with the work that you're doing where there'll be cross
border transport of electricity in increasing amounts, how do you
think about the geopolitics of energy transport specifically when it
(35:18):
comes to electricity.
Speaker 2 (35:19):
I think it's a it's a very good reflection and
it's of course something that will impact the company like KT,
it will impact the world, etc. And let me say
start by saying that conflicts and trade barriers it's not
good for business just in general period. That applies to
all companies and all countries. Now, with that said, we
are a non political organization of course, Also we are
(35:42):
you know, a humble technology provider if you allow the expression.
But I would also say that cross border electricity trading
and just being interconnected from a grid perspective, it's just
from a physics perspective necessary for the grid to be
able to operate in the stable matter and physics maybe
(36:02):
is one of the few things that even Trump's politics
in a sort of way. Now. I think one of
the big paradox in our industry is the fact that
any of these systems are designed, constructed, and operated with
decades in mind from an horizon perspective. Politicians, on the
(36:23):
other hand, are elected on a four year term basis,
and of course they have to gather votes, they have
to get re elected, and they have to do what's right,
you know, during you know, with the wins that are
in force at that moment in time. And I think
this paradox between the two is a difficult one. And I,
you know, sadly also think that that's why sometimes we
are also not making the best decisions for for example,
(36:46):
for a specific discipline like the anergy system, or you know,
how should we operate the world in five, ten, fifteen years,
simply because that does not get you votes. And I
think there is no way around this paradox. But I
would just again from a humble technology provider perspective, of
course we see that when it comes to any d policy,
if there was one point which deserves you know, by
(37:10):
parties and agreements or like in Sweden, you know, cutting
across the different blocks and the same thing in Europe.
I think it really is the energy system because there
you need to have the long, long term strategies in
mind when you're making the decisions. But to your point,
is there a risk in this industry because of you know,
political taking decision left and right, changing, rolling back or
(37:30):
rolling forward. I don't think I can be ignorant to
say that there is not. But I think on the
long term, medium to long term, I'm less worried. You know,
the fundamentals of electrons as a way to consume energy,
the fundamentals of electrons as a way to transport energy,
is there so in the medium to long term. Sadly,
with the impact on climate that we are having on
(37:51):
this planet, I think we feel that we are in
a robust industry and we feel strong with the portfolio
and the capabilities we have.
Speaker 1 (37:58):
Well, the robust growth in your store price speaks to
that point. Thank you, Klaus, thank you so much. I'm
now speaking with Will Mathis, my colleague here in London
and the reporter who worked on the story that told
us about the shortage of cables and how it became
a bottleneck.
Speaker 2 (38:17):
I Will Hi Aksha. Thanks.
Speaker 1 (38:19):
You've spoken to Klaus in the past. You also went
and saw one of these massive towers where these cables
are manufactured. But one thing that I am still puzzled
by is if there's such a demand for these cables,
and these companies are minting money, why is it that
they are not able to resolve these bottlenecks more quickly.
Speaker 3 (38:43):
Well, one reason is just that it's very hard to
get into this business. If NKT, Nexon's Prism and some
of the other Asian suppliers that know how to make
these cables don't want to massively scale up, then it's
hard for someone else to get into the business and
start doing it. It's a deep moat, as people say,
(39:06):
that's hard for new companies to start building HVDC cables.
You know these towers, they're weird structures, and if you're
some other business who's never done that before, you're going
to think twice before deciding to build one, and even
if you could find a location and find the materials,
it's just going to be hard to do. So these
(39:28):
companies are investing in new capacity, but they are doing
so very carefully, and they want to make sure that
every dollar they spend that they're going to be able
to profit from for a long time to come.
Speaker 1 (39:39):
But there's a risk with this, which is if it's
a big moat and you have these limited number of
companies making those cables, they can get into price fixing,
which they have done in the past and have been
caught and have been fined as a result. Talk as
to why that scandal happened in the first place and
what could be done to ensure it doesn't happen again.
Speaker 3 (39:59):
Yeah, this is something that really surprised me when I
was researching the cable industry that going back as far
as nineteen oh one, there is documented collusion among cabling
companies in Germany. That behavior basically continued up until pretty
close to the present day. You know, back in twenty fourteen,
the European Union find all the big cabling companies for
(40:20):
collusion and I read through those documents and they're you know,
go around the world and stay at hotels and talk together,
and they basically say, okay, you Europeans, you stay in
your market, and we Asians will go in our market.
And if they got a you know, request for proposals,
then they would let each other know and make sure
that the right bidder one the contract and they've been fined.
(40:45):
And today they would say, you know, that's all in
the past. And I think if you look there, you know,
there's no evidence that's still going on. But if you
look at it, there's kind of no reason to continue coluting.
There is so much demand and constricted supply, so you know,
one of the CEOs I spoke to for the story
(41:06):
asked him, you know, what do you think of competition,
and he said to me, you know, everyone is behaving.
So if everyone is behaving, everyone is trying to keep
prices at a good level for everyone else, there's not
so much expansion of supply, then there's really no wouldn't
be a need toclude even if they wanted to take
that risk.
Speaker 1 (41:26):
Again, thank you Will, and please do check out the
story that Will has written. We'll link it in the
show notes. Thanks Socshean, Thank you for listening. To zero.
This is the third and for now the final episode
in the Bottleneck series. Let us know what you think
of the series and if you'd like us to cover
(41:47):
more of these bottlenecks. Please also take a moment to
rate and review the show on Apple Podcasts and Spotify.
Share this episode with a friend or with your local electrician.
And now for the sound of the week. That was
(42:11):
the sound of a nuclear reactor starting up and producing
what is called charon cough radiation. This episode was produced
by Oscar Boyd. Bloomberg's head of podcast is Saige Bauman
and head of Talk is Brendan newnham. Our theme music
is composed by Wonderly Special Thanks to Will Mathis, Amon Farhat,
Eleanor Harrison Dngate, Samersadi, Moses Andim and Sherwan Wagner. I'm
(42:34):
Akshadrati back soon.
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