What does the future hold: Cables or pipelines?
Mehmet Öğütçü and Julian Popov*When we talk about energy cross-border infrastructure or energy security we usually focus on pipelines, tankers and increasingly on liquefied natural gas (LNG) carriers and terminals.
The world of energy however is transforming fast and there is a good chance that high voltage power cables will become strong competitors of the oil and gas pipelines and the maritime routes.
Today China is the biggest investor in high voltage direct current (HVDC) cables which can carry electricity with only 3.5 percent loss per 1,000 kilometers. Most of them connect internal points of generation and consumption but China has ambitious plans for expand the grid links far beyond its border.
Countries in east and central Africa plan to build high voltage cross-border electricity transmission lines to connect the grids in the Nile equatorial lakes countries with Kenya and then possibly with Uganda, Rwanda, Burundi and the Democratic Republic of Congo.
There is also an ambitious project to develop a regional power grid from Kazakhstan to India. This grid would feed the growing energy needs of India, Pakistan and Afghanistan, and help integrate the economies of central and south Asia.
The regional power interconnection of the Gulf Co-operation Council allows electricity exchange among its six member states - Kuwait, Saudi Arabia, Bahrain, Qatar, the United Arab Emirates and Oman - under an agreement signed in 2009. The grid aims at sharing capacity and improving supply reliability, which will reduce the need for investment in new generation plants.
We think about gas, oil and electricity as the three main, interlinked, but separate pillars of our energy system. Pipes carry oil or gas and cables carry electricity. This common wisdom is now being challenged in several ways:
- Renewable energy is maturing and that requires additional cable infrastructure to integrate the generated power.
- High energy efficiency of buildings and smart energy management solutions make electricity an economically viable way of heating (creating direct competition with gas).
- Advanced cable technologies create better opportunities for long distance transmission.
- Cables can carry any source of energy that could be turned into electricity. Pipelines could only carry oil or gas.
- The growing trade of liquefied natural gas is undermining the reign of long-distance gas pipelines.
All this does not mean that oil and gas pipelines or tankers will disappear soon. Their role and importance however will change. To prepare for this transformation we need to start thinking about gas pipelines in conjunction with electricity infrastructure.
The rapidly declining cost of renewables makes them very attractive economically. However, the issue of their variable generation needs to be solved. One of the best ways to address this problem is by connecting generation capacity in different geographic areas and across different time zones.
We also have to be much more flexible in our strategic thinking. For example, the EU relies very much on the Southern Gas Corridor for the future diversification of its gas supply sources. This is a wise but old-fashioned strategic approach.
The Southern Gas Corridor should in fact be viewed as the Southern Energy Corridor. This is not simply a linguistic game. By including the electricity options into the strategic energy thinking, the EU countries, as well as Turkey and the Western Balkans, will significantly expand their opportunities for deeper energy diversification and strengthen their energy security.
One day the Southern Energy Corridor will combine flows of oil, gas and electricity in both directions leading to the high-value European/Turkish markets and the energy-hungry Asian markets.
We must stretch the limits of our imagination. China’s new “Economic Belt and Silk Road” initiative offers such a strategic opportunity and should be responded to with a similar visionary move from the EU and Turkey.
* Mehmet Öğütçü is the chairman of the Bosphorus Energy Club and Julian Popov is the former environment minister of Bulgaria