https://www.economist.com/business/2021/10/16/the-booming-business-of-knitting-together-the-worlds-electricity-grids

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[                    ]
BusinessOct 16th 2021 edition

An undersea change
The booming business of knitting together the world's electricity
grids

Intermittent renewables and current mayhem in energy markets
highlight the importance of firms that link up producers of power
with faraway consumers

[20211016_WBP003_0]
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Oct 16th 2021

CLV Nexans Aurora

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IMAGINE A TOY boat that might fit in the palm of your hand. At
mid-ship add a squat spool of sewing thread lying on its side. Scale
that up about a thousand-fold and the result is the 150-metre-long
Nexans Aurora. The thread in question is kilometres of high-voltage
power line ready to be deployed from the aft of the ship across the
sea floor. Each cable, weighing a hefty 150kg per metre and thick as
a tree trunk, is a woven mix of aluminium, steel, lead and insulating
material. The single stretch loaded up in a bobbin nearly 30 metres
across is as heavy as the Eiffel Tower.

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The ways electricity is both consumed (more of it, notably by cars)
and produced (also more, increasingly through renewable sources, see
chart 1) are changing. Balancing energy supply and demand is never
easy, as mayhem in European gas markets has shown. It is all the more
complex for electricity, which is trickier to store than not just
gas, but also coal, diesel or wood chips. Renewables add more
wrinkles: wind blows haphazardly; the sun can be obscured by clouds
or night. As a result, most of the power that is produced has to be
consumed immediately, and mostly in the place that produces it.

The idea of separating consumption from production in time--using
giant batteries or other storage--has received plenty of attention
from entrepreneurs, politicians and investors. But it is currently
impractical at scale. So the notion of separating the two in space
instead is gaining ground. It requires an upgrade in the
behind-the-scenes wiring that carries power from where it is made to
where it is used. The task can involve plugging an offshore wind farm
into the grid. Also needed are connections joining up national
networks, often within blocs where most of today's electricity trade
takes place, like the EU.

[20211016_W]

Either way, cables are required, and boats to lay some of them. The
potential is vast. Just 4.3% of power generated in 2018 by members of
the OECD, a club of industrialised countries, was exported, up from
2% in the 1970s but a far cry from a fungible commodity like oil.

All this has resulted in surging order-books for cable-makers and
-layers like Nexans, the Nexans Aurora's eponymous French owner.
Credit Suisse, a bank, forecasts undersea wiring alone to bring in
revenue of around EUR5.5bn ($6.4bn) in 2022, up from EUR4.5bn this year.
It expects cable firms' revenues from offshore wind installations to
more than treble in size between 2020 and 2035. Investors' enthusiasm
around electric cables has sent share prices of Nexans and the
industry's two other European giants, NKT and Prysmian, up by 48-125%
in the past two years (see chart 2). In February Nexans announced
that it would soon spin out its non-electric cables business
(catering to industry and data centres) to focus on transmission
lines.

[20211016_W]

Satisfying see-sawing electricity demand is complicated but well
understood. British grid managers have long known how to turn on
power plants just as soap-operas end and tea-craving viewers turn on
their kettles. Connecting power grids with different production and
consumption patterns is equivalent, matching supply and demand by
transferring electricity across distance instead.

Take Denmark. It has installed enough wind turbines that, when it
blows, no other source of electric power is required. But it needs a
Plan B, given the fickleness of wind. Without batteries it could keep
old fossil-fuel plants open, and use them intermittently. A more
elegant solution is a cable to Norway, which has ample hydroelectric
potential. When the wind blows, both places can use Danish wind
power, keeping Norwegian water in reservoirs. On calm days the
Norwegian lakes are drained a bit faster to succour Denmark.

Further links from Denmark to the Netherlands, Sweden, Germany and
Britain (planned for 2023) provide yet more options. Add enough links
to enough places, and electricity becomes a tradable commodity. For a
local grid manager, reducing carbon emissions becomes a case of
buying and selling the right contract rather than building a solar or
wind farm in the wrong place.

That prospect explains why interconnections are multiplying. Europe
is the new frontier of cable-laying. Electrification, notably through
renewables, is a key plank of its ambitions to reach "net zero"
emissions by 2050. National grids have been compelled by EU rules to
integrate into a single network, often backed with public cash. The
continent's scraggy coastline is ideal for wind power--and for
deploying electric cables at sea, out of sight of anyone who might
object to them.

Shifting power-generation dynamics play a part. Germany, for example,
was once a big exporter of power but is becoming an importer as it
finishes shutting down its nuclear plants and phases out coal. The
green push also means electricity is being generated in all the wrong
places. In Italy, power plants were built near where industry was
located, mostly in the north of the country. Now the wind blows and
sun shines mainly in the less-developed south. "The shift to
renewables means we need more rebalancing, more transition," says
Stefano Antonio Donnarumma of Terna, an Italian manager of
transmission lines.

As a consequence, the making and deploying of electric cable is one
of the rare industrial sectors that European firms dominate. Besides
France's Nexans, Prysmian is Italian and NKT is Danish. They have
around 80% market share outside China, where demand is largely met
locally. Beyond merely manufacturing woven metal wires (among other
products), they lay them as well, commissioning and operating ships
like the Nexans Aurora, a EUR170m craft fitted up the coast from an
existing Nexans factory in Halden, Norway.

Advances in undersea cable-laying have helped open up the prospect of
new and novel interconnections. Whereas previous generations of ships
risked tipping over if they were to send wires much below 1,200
metres, the Nexans Aurora and a flotilla of similar vessels from its
rivals can lay the cables at depths of 3,000 metres. (An accompanying
robot can dig a trench in shallower waters, the better to protect
against stray anchors and fishing nets.) That opens up the
Mediterranean. This week the Nexans Aurora was preparing to deploy
her first cable, connecting the island of Crete to the Greek
mainland.

Longer cables mean fewer legs of 100km or so that need to be stitched
together. The viability of much longer interconnectors is being
mooted as a result. A 720km Norway-to-Britain link started operating
this month. Many are in various stages of planning, for example
hooking up Greece and Israel, or Ireland and France. Others are more
speculative, such as a 3,800km cable linking the sun-baked solar
fields of Morocco with Britain. Another consortium wants to link
Australia, Indonesia and Singapore, a 4,200km project.

Christopher Guerin, boss of Nexans, says 72,000km of such cables will
be laid in the decade to 2030, seven times the current stock. That
comes on top of wiring needed to upgrade antiquated connections on
land, many of which are past their sell-by date. A power crisis in
Texas earlier this year helped unlock stimulus funds for grid
upgrades in America, too.

A more immediate opportunity is hooking up wind farms to onshore
power grids. Cable salesmen are cheered by the fact more and more
such facilities are being developed far out at sea. The possibility
of floating wind farms, which could be farther away still, will add
to their order books. The International Energy Agency, a rich-country
energy club, estimates 80 gigawatts of offshore wind farms will have
to be installed every year by 2030 to meet decarbonisation targets.
Each gigawatt of offshore capacity requires around EUR250m of cable
input including the installation, says Max Yates of Credit Suisse.
The cable costs roughly as much as the foundations, behind only the
turbine itself.

The urgency of this global rewiring effort is almost imperceptible
from the deck of the Nexans Aurora. Spools release their wire at a
leisurely pace: 10-12km a day is considered tidy work. But the future
energy highways are at last becoming a reality. Steady as she goes. #

This article appeared in the Business section of the print edition
under the headline "An undersea change"

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