Understand billionaires’ fight in ambitious project for submarine energy cable

A dispute between two billionaires once united in a visionary project to send power from Australia to Singapore via the world’s longest undersea cable has intensified with one blaming cost overruns on “inexperienced management”.

Fortescue Metals billionaire Andrew “Twiggy” Forrest told CNN backstage at the World Economic Forum in Davos that capital costs for Sun Cable’s Australia-Asia PowerLink Project (AAPL) “kept rising 10%, 50%, 100%”.

“This is not sustainable. This is what I would expect from inexperienced management and a board of directors that has never done big projects,” he said.

Sun Cable brought in independent experts last week to appraise the company’s assets and deal with creditors, raising questions about the future of the A$35 billion ($24 billion) project, which it billed as creating the “first intercontinental renewable energy system in the world. ”

Sun Cable would have connected the world’s largest solar farm with the largest battery and the largest submarine high voltage direct current (HVDC) cable, providing up to 15% of Singapore’s electricity from 2028 as the island tries to reach its zero emissions target by 2050.

The cable’s success would have shown that it is possible to pump vast amounts of renewable energy across the oceans to countries that lack the space or means to generate their own.

But the project’s billionaire backers Forrest and Atlassian co-founder Mike Cannon-Brookes disagreed over its scale and scope and are now pitching competing visions for Sun Cable to creditors caught in the middle.

A statement from Cannon-Brookes’ private investment arm, Grok Ventures, suggested that all investors except Forrest’s investment arm, Squadron Energy, remain committed to the cable.

“Grok and all other investors are firmly convinced that AAPL is the project to be supported – it continues to reach important milestones and remains on track to provide affordable clean energy to Singapore,” he said.

It is not viable?

But less than a year after publicizing the project’s ambitions to help raise millions of dollars in capital, Forrest-backed Squadron Energy now says the cable is “not commercially viable.”

Even worse, Forrest said its main customer Singapore doesn’t want it, a claim disputed by Grok Ventures, which said the cable supply was oversubscribed, indicating strong demand from Singapore.

In a statement to CNN a spokesman for the Energy Market Authority (EMA) of Singapore said Sun Cable’s proposal was among 20 received for electricity imports and they could not comment on the company’s financial problems.

Prior to last week, Sun Cable was selling the idea of ​​a 30,000-acre solar-absorbing farm across a vast expanse of Australia’s Northern Territory, with local and federal government backing.

The power would be transported via an 800-kilometer 3-gigawatt (GW) overhead HVDC transmission line to a site near Darwin, where it would be used to supply cheaper power to the local market from 2026 onwards.

Another 1.75GW would be sent to Singapore via Indonesia via a 4,200km undersea cable – longer and possibly deeper than any other such cable ever laid.

It would be a world first in terms of scale and ambition to open a new path to greener energy for countries unable to produce their own. In October, during a joint press conference with Singapore’s Prime Minister Lee Hsien Loong, Australian Prime Minister Anthony Albanese described Sun Cable’s plan as the “ultimate win-win”.

But Forrest says that after speaking with representatives from Asia, particularly Singapore, it’s clear to him that they don’t want that.

“What they wanted were greener molecules,” he said. “So instead of building an extremely expensive cable, just install the solar farm… create the hydrogen, put in the nitrogen, if you want ammonia, (or) carbon dioxide, if you want synthetic green methane, or just straight hydrogen, and send it to Singapore because that’s what they’re telling me they want.

Bruce Robertson, an energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), says that transporting hydrogen is a difficult and expensive process that has not been proven to work.

“The shipping part was never done, there’s nothing to resolve – you’re really breaking new ground,” he said.

Robertson said hydrogen molecules are very small and leak easily from pipes and vessels normally used to transport gas. Hydrogen also needs to be cooled much more than natural gas is cooled to create liquefied natural gas (LNG), dramatically increasing the costs involved.

Tim Buckley, director of Climate Energy Finance, says the export of green hydrogen (hydrogen generated from renewable energy) is at least a decade away.

“The export market for green hydrogen has shrunk dramatically when people realize it will be a decade or two before you can actually ship green hydrogen anywhere overseas,” he said.

“People have spent a lot of time, myself included, looking at green ammonia exports, but again, this is problematic. It is much more commercially viable than green hydrogen, but there is a loss in efficiency.”

the cable plan

The plan to lay a cable from Darwin to Singapore, navigating currents, soil acidity, deep trenches and ridges, is also immensely difficult, but not impossible with sufficient financial backing, according to Bruce Mountain, director of the Victoria Energy Policy Center at Victoria University.

He says it could still happen, even without Forrest’s involvement.

“There are a lot of rich corporations and people other than Andrew Forrest,” he said. “So if the economic sense is compelling enough, I think they’ll get the investment.”

Mountain said that when Sun Cable’s plan was announced, it was considered incredibly ambitious, but since then other equally long cables have been proposed elsewhere that are still moving forward.

For example, Xlinks plans to run an almost as long and powerful cable from Morocco to the UK. However, he says there are some key differences that could make the Xlinks more commercially viable than Sun Cable’s line.

Britain’s electricity demand is eight times that of Singapore and the cable would run through Portugal, Spain and France – all potential customers – he said, while Sun Cable’s link would run through Indonesia, which would benefit from investment in the cable, but would not necessarily buy its power.

Either way, he says there’s a huge economic incentive to overcome hurdles in transmitting renewable energy over long distances in a world that needs to act fast to reduce carbon emissions.

“The distribution of wind and solar energy is uneven, as is coal and gas, so I think we will learn to transmit it effectively over long distances where there is an environmental benefit,” he said.

“Singapore, South Korea and Taiwan – many of them have very similar problems of inadequate clean energy resources for the size of their energy demand.”

Deadline for Singapore to reach zero emissions

Both scenarios presented by billionaires mean potential export to Singapore.
Meanwhile, the city-state faces a tough deadline to reach its goal of zero emissions by 2050. By 2020, 95% of the country’s electricity came from natural gas, a planet-warming fossil fuel, imported from Indonesia and Malaysia.

Last October, Singapore’s Deputy Prime Minister Lawrence Wong said, “We are already one of the most solar-density cities in the world… (but) even if we maximize all available space in Singapore for solar deployment, we still we won’t be able to generate enough electricity to keep the lights on.”

In its statement, the Energy Market Authority (EMA) said it intends to source electricity from a mix of natural gas, solar, regional power grids and low-carbon alternatives such as hydrogen, and is in talks with several potential suppliers. from countries such as Indonesia, Laos, Malaysia and Thailand.

The Malaysian country’s first import test began last year, with 100 megawatts sent through a new interconnector from the Pulau Bulan solar farm, according to the EMA. More has come from Lao hydropower through the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMS-PIP), a move the EMA has called a “landmark”.

The EMA says it is on track to meet its target of importing 4 gigawatts of electricity by 2035, but is open to offers from other potential contributors “from all sources, including Australia”.

Forrest told CNN that, in his mind, Sun Cable needs to work for the customer.

“The customer is always right, and while the company is on a course to not give the customer what I believe they want, we are happy to see this company completely restructure and change course.”

In its statement, Grok Ventures said that “prospective bidders will have the opportunity to make up their minds when they have access to the facts through the data room during the sale process”, with the first meeting of creditors scheduled for Friday.

“We believe this information will strongly emphasize AAPL’s commercial viability and show progression towards Sun Cable as a development platform for large renewable energy projects,” said Grok Ventures.