Niklas Persson: 0:00

If you continue just to build more renewables without tackling the grid, of course you spend a lot of money and then you have to curtail the renewable generation at a certain point of time because you have too much, the grid cannot take it and cannot deliver it to the consumer. So, of course then you have no economical benefit of doing so.

Tom Raftery: 0:30

And once the grid becomes a constraint, this stops being just an energy problem. It starts shaping where investment, industry, and electrification can actually happen. Good morning, good afternoon, or good evening, wherever you are in the world. This is Climate Confident Stories and Strategies that Cut Emissions episode 294, and I'm your host, Tom Raftery. My guest today is Niklas Persson, CEO of Grid Integration at Hitachi Energy, and we're going to look at the grid as the missing link between clean generation and real world decarbonisation. From interconnectors and resilience, to permitting, industrial competitiveness, and the infrastructure needed to make electrification work at scale. Let's get into it. Niklas. Welcome to the podcast. Would you like to introduce yourself?

Niklas Persson: 1:29

Thank you Tom. Really happy to be with you today. So Niklas Persson is my name, working with Hitachi Energy since almost 30 years now in the industry of electrification. And today I'm the CEO of GRID integration that is covering all our systems solutions within Hitachi energy, working with HVDC, power Electronic Solutions, substations and other grid solutions that the society badly needs today, Tom and happy to be here with you.

Tom Raftery: 1:57

Fantastic. And for people who are unaware. Niklas, can you give us some kind of top line numbers around Hitachi Energy, you know, number of employees gigawatts under control, countries worked in, anything like that?

Niklas Persson: 2:10

We are a company that is working in more than a hundred countries. You can say Asia, Europe, Middle East, and Americas. So quite well spread from a geographical standpoint. And today we are more than 50,000 people and have more than $20 billion of revenues. And we are rapidly increasing. So we, we grow with the, ambition that the society have today. So we are a the world number one in electrification when it comes to transmission systems and transmission products. We are very happy to be in that spot and to be able to support our customers.

Tom Raftery: 2:47

Fantastic. And what does then grid integration actually mean and why should someone running a business care?

Niklas Persson: 2:56

We are putting everything together and engineering solutions in a even more complex system today that we have with more renewable integration coming into the energy system. And that's where we provide value to our customers to run large projects, do the engineering, the delivery, and the construction of these large projects.

Tom Raftery: 3:19

And Niklas, for decades, if not longer, the grid has been largely invisible to people, but that's changing very quickly. So what would you say has changed to make grids now a policy and boardroom issue?

Niklas Persson: 3:35

I think in the past we have had a, a very successful target both from customer but also from Hitachi Energy and our competitors to improve efficiency. And while electricity as a share of the energy mix has not rapidly increased, we have been able also to utilise the spare capacity you can say in grids, but also come with more efficient solutions with less losses. So you can run the grid more effectively in the past and now for various reasons. But of course the change in the energy mix that we want to add more renewables into the grid is changing. We also want to have a more secure and, and resilient grid, which means that we have to have more electricity instead of fossil fuels, especially in the regions like Europe, which wants to be less dependent on fossil fuel in the future, which means that you need to have grid to carry the electrons to the consumers. And this is of course then spiking the electricity demand industries and data centres, et cetera. Also want to have more electricity or clean energy. And therefore you see now today a much bigger interest of grids because that's the key bottleneck, to make sure that you do this energy transition, not only to change the type of generation that we have, today.

Tom Raftery: 5:03

Okay. Are we reaching a point where building more renewables without fixing the grid delivers diminishing climate returns?

Niklas Persson: 5:13

I would say if you continue just to build more renewables without tackling the grid, of course you spend a lot of money and then you have to curtail the renewable generation at a certain point of time because you have too much, the grid cannot take it and cannot deliver it to the consumer. So, of course then you have no economical benefit of doing so. So you have to have a synchronised planning to be able to achieve what we want to achieve actually to change fundamentally the energy system, to carry more electrons than to have an energy system that is based on fossil fuels.

Tom Raftery: 5:50

When the grid can't keep pace, where does that pain show up first? Is it emissions? Is it prices? Is it reliability? Investments? Somewhere else?

Niklas Persson: 6:00

Tom, I think it's all of the above actually. You have pain points everywhere, but I think the, the one that is seen now in many countries that you have, 10's of gigawatts of applications where they want to connect to the grid. This is of course a big pain point where, could be a data centre, it can be an industry, it can be a, a fleet of vehicles that wants to connect to the grid and get energy through electrons that is simply not onset positively within time. So you have the risk of having, of course, a more renewable energy or any energy source. Could be nuclear as well added grid, but not grid that is ready to receive it in an effective way. And of course, that is the key challenge. We as a society, especially here in Europe have.

Tom Raftery: 6:50

So would you say grids are becoming an industrial competitiveness issue as much as an energy issue?

Niklas Persson: 6:57

Absolutely. I, I, I believe so. I mean, if fundamentally, if you take Australia, it's a very interesting case actually. And they are managing to add a lot of solar, but also wind into the energy system to be cleaner, but also to have homegrown energy to be resilient in terms of the energy source. And they're managing the complexity that comes with it. We have also, to be clear, renewable integration is going to have less intermittency in the grid and that has to be managed. Thereby they're adding a lot of battery energy storage so they can manage the fluctuation and still run a grid that is reliable. And Australia is managing this and they are moving very fast, I must say. Of course, it's very expensive in the transition when you still have the old way of doing things and you're adding the new way. And that transition, and this is where we as a consumer, we see some pain points on industries that in the transition period it'll be a bit expensive.

Tom Raftery: 8:00

That means there's kind of an awkward investment problem then that the grid has to arrive before the demand does. So what's more expensive, building grid capacity too early or waiting until demand is certain?

Niklas Persson: 8:15

I think one way of actually managing this Tom is also to look at interconnectors. I think we have to collaborate more. And you see this in North America, you see it in Europe, but you see also quite interesting phenomena in India and in China, which are vast regions or countries where they shift bulk power across states. It is one country and they can manage it. While here in Europe, but also partly in North America through state regulations and federal regulations. We are not as interconnected as these large continents are or will be in the future. If you look into India and China. And I think that that's somewhere where we can actually ease the cost of generational grid first to do more interconnected, because that adds flexibility to the grid. And this is an area where I, I believe our politicians and the grid planners and and so on that they need to really look into, add more interconnection capacity.

Tom Raftery: 9:20

Nicholas's answer points to a third option. Don't treat every national grid as an island. Interconnection can reduce the amount of spare capacity each system has to build alone. But does that shared dependence make you safer or more vulnerable?

Niklas Persson: 9:40

Here it becomes, from my perspective, it's a political discussion. And of course you can see that relying on Russian gas, which is another type of energy through a gas pipeline instead of a cable or an overhead line, that made you vulnerable. At the end it is about peace and, and countries that have the same kind of view on the, on the world, the order, et cetera. If you can collaborate cross borders, of course that is the most efficient way of building out the grid and the energy system. And I believe that that is the also a way of getting countries to actually align and, and work together because it's cheaper at the for both parties.

Tom Raftery: 10:25

So is energy independence in an electrified world actually going to require more interdependence?

Niklas Persson: 10:34

I don't think you should say yes if you want to be a country where you say, okay, I take care of myself and so on. But just think about the cost to consumer. If you have to design one system in one region to be fully self sufficient when it comes to own energy, you have to design your system for peak demand. Your own peak demand. And as a energy and electricity will grow in the future given the, trends with data centres, electrification of vehicles and industries, et cetera. If you then try to do that as a country yourself, it'll be costly. But if you interconnect and start to manage the system with the technology that is available today, you can reduce the cost to consumers and quite a lot actually.

Tom Raftery: 11:22

Sure, sure, sure. And we'll come on to Elmed in a second, but where have interconnectors already made a measurable difference to resilience, prices or renewable utilisation?

Niklas Persson: 11:34

I think for me, Denmark is a very good example actually. And from time to time they have more renewable energy than they consume and they have interconnectors to Norway, to Sweden, to Germany, to UK. And they can transport that wind energy to all these countries which is using it. And in Norway you can use it to not consume your hydropower water that you have in your dams and therefore you can save it. It's kind of a large battery, but it's water instead of batteries. So Denmark I think is a very good example of being, well interconnected, can sell energy at times, but there are also times when wind is not blowing and they have a deficiency. And therefore, Sweden, Norway, Germany, UK, can support Denmark in times of no wind or little wind in the country. And it is a super good example of how interconnection can actually help not only Denmark, but the neighbouring countries as well.

Tom Raftery: 12:36

I mentioned Elmed earlier. For people who are not familiar, can you tell us what Elmed is and then we'll dive a little deeper into that.

Niklas Persson: 12:45

Yeah, Elmed is an interconnector between Tunisia and Italy. So it's the first HVDC connection between Africa and Europe. And it's a great example of where you connect solar power, wind power where Tunisia is aiming to build out their renewable energy and creating a secure energy system in both ways, both for South Italy with Sicily and, but also for Tunisia when they would have deficiency or problems and so on. So it's both resiliency for both countries, but it's also in the future being an enabler for energy through electrons, but also in a more sustainable way.

Tom Raftery: 13:29

And what kind of size is the Elmed project?

Niklas Persson: 13:32

It's a 600 megawatt.

Tom Raftery: 13:34

600 megawatt. Okay. What becomes possible when we start connecting energy systems across continents rather than simply across neighbouring countries.

Niklas Persson: 13:44

So it depends how you run the system. But, but of course you can have energy trade. You can also sell and buy depending on your needs, but it can also be a generator. So if you add a lot of solar in southern part of Italy and you would run the, Elmed, project, let's say not at full power all the time. Let's say you run 400 megawatt and you, you would have a problem in the system, you can maybe very fast add another 200 megawatt, which provide inertia to the grid. So interconnectors, depending on how they are utilised and how you plan them, you can also use, use as kind of a generator to build resiliency in the grid in times of disturbances, as you add more renewables, you have less intermittency and you need also to have functions where you can support the grid. We have also something that we call grid forming capability where you can, through the power converters, you can help to stabilise the grid from a frequency and voltage perspective. When you have maybe issues in the AC grid, can use the converter to stabilise both the voltage and frequency. So that's kind of an advantage when you do kind of interconnectors.

Tom Raftery: 15:24

And what does that change strategically for Europe and North Africa?

Niklas Persson: 15:30

I think for North Africa is strategically for them, given how much sun you have in, in the Sahara. If you can make this politically show that it's stable, you can be a trusted party to Europe. In theory, you could add a lot of clean energy from Africa to Europe, especially to part of Europe. And it's fairly cheap as well to build if you compare to build solar power in Africa, flatland desert compared to build it in Greece or hilly Italy and so on, it is of course much cheaper. So you can get cheaper energy, you can get clean energy and you can get the energy that helps to secure your resiliency as well when you interconnect. So there are many benefits both from Africa and the African and northern countries, but also as Europe quite a lot of benefits. You get cheaper energy, you get flexibility and at the end you can connect energy up to the northern part or central part of Europe as well. And you start then to be able to support and that's what the European Commission wants with the grid package. More interconnection can help to stabilise the whole grid and bring cheap energy from the north with the hydropower and the North Sea with the wind and then the sun from Africa. It doesn't go over a, a day or a, a year or two, but over the decades and you talk 2040, there is a lot that can be done for the society trying to tie these energy systems together.

Tom Raftery: 17:07

Right. And of course, Europe and Africa have kind of a, a chequered history. Are projects like this being done sensitively to make sure that we're not just extracting value from North Africa without giving anything back.

Niklas Persson: 17:27

You mean that Africa gets anything back

Tom Raftery: 17:29

Yeah, exactly. Exactly. In terms of community benefits or things like that.

Niklas Persson: 17:33

yeah. I, you know, I, here, I must say that of course Tunisia get paid for the energy that we buy, and so it's a clear business proposition for them as well to sell that energy. So there is a return of investment for sure, for Tunisia as well doing these kind of projects as it is also for Italy to do it, because of course they see a return on investment. So you can see it either from a financial perspective. Yes. I believe that there is a clear benefit. You can see it from a community perspective. You create a job to construct the projects. You create service opportunity for people, and you create an opportunity to develop your workforce to be a skilled workforce, in Tunisia as well, and over time. So I think it, there are many benefits that that comes with these kind of complex and large projects.

Tom Raftery: 18:27

Cool. Great. And of course, drawing lines between countries and a map is, is easier than building them. So without getting technical, what does HVDC allow us to do that conventional transmission might struggle with?

Niklas Persson: 18:41

So that's a, a good question. And these, connections are long distance. And long distance normally you have quite a lot of losses through AC .You can say 10% losses. While in DC you have maybe up to one, one and a half, 2% losses. So it's quite a big difference in terms of losing energy when you do long distance transmission. If you want to connect the northern part of of Africa and if you to say, okay, I want energy in Italy, from Africa on AC you can of course go to South Spain and then build transmission through Spain and around France and back in into Italy. Very costly and very time consuming. And of course, permits is, is an issue to get when you want to build on land with overhead lines. So that's a, a drawback of doing it in AC. While on DC you can just lay a, a cable and if it's more than a hundred kilometres you go DC because of loss system and problems to do it on an AC cable. That's the real benefit. You can connect long distances very effectively and it's also more affordable.

Tom Raftery: 19:48

Right, and I, I've seen reports of HVDC in China where they're connecting western China, where there's a lot of renewables generating electricity to eastern China where there's a lot of consumption and we're talking distances of two, three, 4,000 kilometres and they're transferring gigawatts of electricity. So it's, it's incredible feat of engineering.

Niklas Persson: 20:12

It, it is, and we are, as Hitachi Energy, quite heavily involved in, in supporting the customers in China. And we have this 1100 KVDC project that we built together with them. And it's more, was more than 3000 kilometres distance, 12 gigawatt of energy So it's quite a lot. That, if you compare to Europe, for example, but also US you need to have a very strong grid to be able to receive such amount of power and to lose, you don't lose 12 gigawatt in one, but maybe you can lose three, four gigawatt depending on the configuration. While in Europe we have set our guidelines or grid codes to not lose more than two gigawatt. So that's sort of why we build this systems that are not more than two gigawatt in Europe for the time being. And in United States, you have three gigawatt, as the maximum loss.

Tom Raftery: 21:08

And what would you say then has proven harder than you expected about modernising grids?

Niklas Persson: 21:16

I must say, Tom, interestingly, I think we are timely having the right technology. So just building more of the AC, it's more about us adding more capacity, transformers, switch gears, engineering, et cetera, and we are on that path. So that's not an issue. If you talk about power electronic solution where HVDC is part as well the technology is available also to build the future grid. I think what is really problematic is that the scale is so big and of course we need to coordinate or do it a bit differently as, as a community. For us, it doesn't work when customers go to market and say, I want one project here, one project there, and so on. Our view is that we, we need to have more kind of frameworks or to create synergies and affordability as well. It's very expensive to do one project at a time. And maybe the third one is of course the, I think grid planners are taking a by surprise about giving permits to build because the queue is so long. And so the timing there is, is a real concern for, me that we see some projects slipping because they don't get consent to build just because of the queue. And that is concerning I must say. So that, that is a piece where I think we could do better.

Tom Raftery: 22:45

How do we fix that?

Niklas Persson: 22:47

I think you need to reform. Today it has been, you know first comes, first serve in, in terms of getting in grid connection. And you, I think you need a holistic view on the network and say, okay, I do have to prioritise generation with transmission and consumption. How to do this? It's of course up to the strategy of countries or regions. It's not an easy one to fix because you can be, you can feel that you be unfairly treated, of course if you're not pushed up in the queue. But as a society, I think we need to work on finding a priority depending on what we want to do. If you want to electrify the vehicle fleets, you need to build depots, et cetera, and then you need to get access to electricity, otherwise it doesn't work. And then you need to put priority on that. If you want to build data centres and have them close to for example, financial districts or whatever, to have speed, or you want to have AI data centre, you need to have access to electricity, and then you have to have priority on that. So if you want to add maybe one windmill of two three, five megawatt, just because you want to be investing it, maybe that's not the right priority for the time being, for that grid connection. So you have to have a, a strategy behind it, which has been lacking a bit so far.

Tom Raftery: 24:08

Okay. And that's where grid planning stops being a purely technical exercise. If access to power determines which factories, depots, or data centres get built, connection policies starts to look a lot like industrial policy. Would you say national grids are eventually going to become the wrong mental model for electricity?

Niklas Persson: 24:33

I think of course transmission grids needs to be there to, to move bulk power to load centres from generation is very important. But I also see that micro grids, so grids, yes, you are right Tom. I think that is enabling the energy transition, but it doesn't have to be the old mental model where you have generation, transmission, distribution. I think you will have more ecosystems where, things are collaborating more across grids. And one thing that we are thinking of is if you take cities like Mumbai and really dense populated cities where it's not so easy to build new infrastructure and you have generation around a lot of solar and wind maybe you need just to have a small and medium voltage DC to, cut cross two, distribution segments and so on. So I think there is also maybe a reform to be made between distribution companies and transmission companies on how you collaborate to make this effectively.

Tom Raftery: 25:37

And what's one development you'd watch as evidence that we've genuinely moved from talking about grid transformation to actually delivering it.

Niklas Persson: 25:46

What is really going to be a, fundamental shift is if we are able to create an offshore grid or an offshore generation area where several countries can collaborate. And that's not easy because it's also all about rules and priorities and guidelines. And maybe you even need a transmission operator offshore that collaborates several countries So maybe we need that and, and that is of course would be in evidence when we start to see that several countries collaborate in building out the North Sea.'cause that's also more affordable. We have to build point to point. You can actually use one to three, four countries if you want. And that is in evidence for me. If that happens, then we have actually achieved a big fundamental shift in, how we build the future energy system.

Tom Raftery: 26:43

Super. Okay, Niklas. It's time now for the lightning round where I ask three or four questions and you get one sentence answers. You ready for that?

Niklas Persson: 26:52

Yeah, I try.

Tom Raftery: 26:55

Okay, great. So build early or wait for certainty?

Niklas Persson: 27:01

Build early when they talk about transmission.

Tom Raftery: 27:05

All right. More generation or stronger connections?

Niklas Persson: 27:09

We need more generation to do the electricity and energy shift we need.

Tom Raftery: 27:16

Okay, faster approvals or more investment?

Niklas Persson: 27:21

Faster approvals and more investment.

Tom Raftery: 27:26

National self-reliance or shared resilience?

Niklas Persson: 27:28

Shared resilience.

Tom Raftery: 27:30

Right. What's the most expensive grid mistake?

Niklas Persson: 27:34

Not building.

Tom Raftery: 27:36

Okay, Complete this sentence. Clean electricity only counts when…

Niklas Persson: 27:43

When it can be brought to the consumers.

Tom Raftery: 27:45

Yeah, Is the grid essentially the logistics system for electricity? I mean, we can produce all the clean power we like, but generation is not delivery.

Niklas Persson: 27:54

No, exactly.

Tom Raftery: 27:56

Okay, time for a left field question now Niklas, if you could have any person or character, alive or dead real or fictional as a champion for grid modernisation, who would it be and why?

Niklas Persson: 28:14

I would have to pick Uno Lamm actually. He's the father of HVDC and he took 20 years to innovate the first HVDC link between Sweden, mainland and Gotland. And we are still building on his legacy. He was a fantastic engineer, a visionary, and brought a lot of innovation into the energy system and I must say he's a fantastic person that is still impacting the energy system of today and in the future.

Tom Raftery: 28:43

Great. Niklas, that's been really interesting. Thanks a million for coming on the podcast today.

Niklas Persson: 28:47

Thank you, Tom. Nice to talk to you