James Humfrey:
Electricity is the world's largest source of carbon emissions. Renewable power is well proven to offer low-cost solutions, but it comes with intermittency challenges and one of the ways to mitigate that is to move electrons over long distances so that you have profiles and mixtures which help alleviate that.
Ellen Fraser:
Hello and welcome to Baringa's Energy Innovators Podcast, where we help you make sense of the energy transition's greatest challenges and opportunities. I'm Ellen Fraser, a partner in Baringa's energy and resources team. Today we're joined by James Humfrey, CEO of Xlinks, and Xlinks are building renewable energy projects that deliver clean power across continents using subsea cables. James, to kick us off, can you give us a quick overview of what Xlinks actually does and specifically what your role as CEO entails?
James Humfrey:
Sure. Ellen, lovely to see you again. So Xlinks is a renewable power developer, as you said, particularly focused on large scale, utility scale, long distance transmission mainly through subsea cables, but also some over overland. And really our thesis is around moving electrons in time and space to manage intermittency and help decarbonize the global grids. And as CEO, I mean a bit of everything really. Obviously overseeing the projects themselves. There's fundraising, board and governance and team leadership and the kind of culture. So a bit of everything, which I love and I've been in the energy industry for, gosh, 25 years and I still love it so I enjoy it.
Ellen Fraser:
Yeah, perfect. Welcome to the energy geek world.
James Humfrey:
Perfect. Subscribe to both, definitely a geek.
Ellen Fraser:
Yeah, wonderful. And what role do you see interconnectors playing in the energy system as we transition to more of a net-zero economy?
James Humfrey:
Yeah, I mean, we believe very strongly in them and why electricity is the world's largest source of carbon emissions. Renewable power is well proven to offer low-cost solutions, but it comes with intermittency challenges and one of the ways to mitigate that is to move electrons over long distances so that you have profiles and mixtures which help alleviate that. So for example, obviously if it's sunny or if you're going west to east or north to south to take advantage of seasonal variations. So if it's sunny one place, it's not sunny somewhere else if the wind's blowing in one place and not blowing somewhere else. So it's all about those interrelations, which is sort of where, if you like, the magic and the value comes.
Ellen Fraser:
Yeah, perfect. And with a project like those that you've been investigating so far, you're bound to come across some really interesting but also quite challenging geopolitical technical challenges. Give me an example of those and how have you faced into them? How are you overcoming those challenges?
James Humfrey:
Sure. I mean, the sort of types of challenges are very typical for big mega project energy type projects. So those can be both sort of geopolitical or with governments or can be to do with permitting. So particular ones which take a long time for us would be around offshore permitting. That's a big process. It's well known, it's been done before. Our team who's worked on at least nine interconnectors historically is well experienced, but it takes time and there's a lot to do. Technical risks are there, but fundamentally it's well proven technology. So the UK has actually been very pioneering with a number of interconnectors. And if you think about interconnectors, although what we're looking at is much longer than what's been done before, actually you still install it by the metre and it's the same technology. So there isn't particular extra technical risk from what we're doing. We're really just combining generation and interconnectors, all of which have been done before, but we're putting them together and doing it at bigger scale.
Ellen Fraser:
Yeah, interesting. Really interesting. And you talked a little bit about intermittency and balancing the grid when the wind's blowing in one place and not in another. Just help me understand what Xlinks is doing there. What is the proposition effectively for the energy system?
James Humfrey:
Yeah, I mean if I take for example, if you look at Morocco where one of our offices is and a major focus area, I mean first of all, the winds that blow in Morocco are trade winds or convection winds, which are different and, in fact, they're slightly negatively correlated to the cyclonic Northern European winds. So if you are generating power that immediately is on with a different profile. It also tends to blow more in the evenings and then that balances well with the solar. And obviously in the Sahara Desert, you have very high levels of radiation, as you can imagine, three times more than the UK. So if you combine really good solar power during the day coupled with this different wind pattern, and then you put in batteries to help some of the diurnal patterns, you then can offer 19 hours of power and optimised around say for example the UK grid or other European countries grids need in terms of their peak demand.
Ellen Fraser:
Yeah, yeah, really interesting. So it's the compound impact effectively of what the system in the UK is doing, but also what you can effectively generate overseas.
James Humfrey:
That's right, because you're moving electrons from where they can be most cheaply generated, so in Morocco's case with excellent solar and wind resources, to where also there's significant demand such as Northern Europe, and it's those differences of generation patterns which help create value. I think there's some other things also about resiliency of grid. I mean we saw that with the Iberian blackout where the Moroccan interconnector was critical to their restart. You can offer frequency services and even over 4,000 kilometres you're still talking sub-second responses.
Ellen Fraser:
Wow.
James Humfrey:
Which is a lot faster than hydropower. So there are a range of other services which are perhaps less obvious perhaps getting-
Ellen Fraser:
Or the auxiliary services effectively for those close to-
James Humfrey:
Exactly. A bit more geeky, but helpful for grids.
Ellen Fraser:
Yeah, perfect. And help me understand that the difference between the government regimes and the regulatory regimes and the various different countries that you're operating in is obviously probably quite different. How do you get close to, how do you work with governments and regulators across the landscape?
James Humfrey:
They are different. I mean within the EU of course there's more harmonisation and you have things like DONDP, et cetera. Within the UK obviously there's well established CfD mechanisms, which the UK's sort of in many ways been pioneering both on a bilateral basis, but also through the kind of auctions. I mean in the end as well as obviously sort of doing your homework and lots of extensive engagement as you go through the details, and there are a lot of legal aspects to that as well in terms of how you're classified as a generator, interconnector, et cetera. I think probably in the end, the key thing with governance is around the proposition. What's the value to everybody involved in a project? And that's at a government country level, it's at a community level or regional level, and it's also for transit countries. So you need to look at all of that-
Ellen Fraser:
Yeah, of course.
James Humfrey:
... as always when you're designing a project so that everyone benefits.
Ellen Fraser:
Yeah, interesting. Really interesting. Switching tax slightly now then looking towards finance. Clearly the project has some momentum now, but I'm really interested even just in the very early stages and then as you scale up the concept, how do you secure finance for a project like this?
James Humfrey:
Yeah, I mean you start with sort of development finance and equity investors. And in our case that's typically been strategic investors who share the vision, who want to invest in long-distance transmission and this overall vision and who not only want to invest through development, but also into construction and want to deploy that sort of level of capital. I think from a sort of debt side, because it's going to be project finance, our projects have project finance, it's a bit of a range. You have sort ECAs because obviously significant procurement, which they support less commercial banks, DFIs. You've got a bit of a range in that capital stack. But as a whole, we've been pleasantly surprised at the huge interest in supporting these types of projects. I think it fits people's mandates. They want to deploy capital at scale. I mean, we wondered whether they were perhaps too big, but actually it's kind of the opposite. Banks and others who previously have bankrolled significant size oil and gas projects actually want to deploy capital at that sort of scale. So that's proven attractive.
Ellen Fraser:
Yeah, really interesting.
James Humfrey:
It all has to be backed up with decent revenue guarantees, but yeah, generally there's been strong appetite.
Ellen Fraser:
Yeah, interesting. And how do you balance within that, the kind of short-term needs to take risk at the beginning of the project versus that longer time appetite for returns? There's quite a lot of tension in that balance.
James Humfrey:
Yeah, well, I think as you go through the stages of project development, the investor type will change. I think at the beginning you are more looking at strategic investors who know capital project development well, understand the timelines, understand the risks, and then you're going to move more into financial institutions as you get nearer to financial close, you have a different risk appetite and different returns therefore as well. As all projects, you have to manage the risks as you go along and you're looking to sort of de-risk at the various stages in order to manage that process and manage the sort of spend accordingly. But to be honest, that's similar to all projects.
Ellen Fraser:
All projects.
James Humfrey:
So there's nothing new.
Ellen Fraser:
Interesting. And public versus private financing creates a bit of a need for balance as well. How have you faced into that?
James Humfrey:
Yeah, I guess, I mean, the renewable industry, at least in the OECD countries, something like 96% private companies. So you don't have a history in the OECD of sort of public development and therefore it comes with private capital. I mean, if you look at the forecast, the IAEA talking about 1.5 trillion by 2030-
Ellen Fraser:
Wow, yeah.
James Humfrey:
... I mean it's far more capital than could be provided by the public sector anyhow. So you're automatically into a partnership and certainly to achieve any of the scale that everyone's aiming to do. But I think it is a partnership because the public sector and government set, obviously, the regulatory landscape, they set some of the grid rules, some of the revenue mechanisms, which are all critical enablers, and the private sector wouldn't be able to do it without that.
Ellen Fraser:
Of course.
James Humfrey:
Private sector brings the capital, it brings the risk taking, some of the expertise. And I think when you've got project finance, they bring good scrutiny of downside risk certainly on the debt side, which is helpful because you need-
Ellen Fraser:
Keeping you honest.
James Humfrey:
Keep you honest, exactly, yeah.
Ellen Fraser:
Yeah. Yeah, good. Excellent. And the relationship with the UK Government, I mean obviously that created a little bit of a knock for the Xlinks projects. Where are you with that? What are your reflections on that?
James Humfrey:
Yeah, when the UK Government announced they weren't going to support the CfD, it was obviously very disappointing. We were surprised, but ultimately we accepted and we move on. We've got a portfolio of other projects, we're working with other governments, and those continue and obviously we're heavily focused on those. The timing of the announcement with us was basically the same time as the decision to go ahead with Sizewell C, that was obviously the government's decision and-
Ellen Fraser:
So they were weighing up one versus the other.
James Humfrey:
Yeah, I imagine. But yep, yeah.
Ellen Fraser:
Yeah, interesting. And how do you see the financing, renewable financing changing over time, because we're seeing governments dip their toes in and then pull back, and how do you see that evolving?
James Humfrey:
Well, obviously there some geopolitical headwinds at the moment, But that said, when you sort of strip that away, you still see enormous growth in renewables around the world and I think you have to keep your focus on installation numbers more than other types of headlines. So I don't think it's quite as bad as perhaps it first seems. I think you'll continue to see very active use of project finance and all of those structures as currently used.
Probably the one thing, if I was to really look ahead, I mean if you think what happened with the LNG industry where you had long-term off takes sort of initially as they established it, and more recently as trading of LNG has developed and a lot of value's created through the trading, the revenue requirements have altered. And I think when you look in the really long-term for electricity, it's back to moving electrons. You're going to see this develop, it's going to optimise, it's going to manage intermittency, it's going to manage pricing. And I think that will have a change in some of the financing requirements.
Ellen Fraser:
Yeah, interesting.
James Humfrey:
But that will take time.
Ellen Fraser:
Evolve, yeah.
James Humfrey:
But you can see how you can see some of the parallels, I think.
Ellen Fraser:
Yeah, interesting. Thinking now about the actual physical cables themselves and the security risk, the infrastructure risk that actually sits in those physical cables, we've obviously seen some tactics from foreign actors around subsea cables. Share your thoughts in terms of what that means for you and what considerations you're having to make in terms of the infrastructure security dynamic.
James Humfrey:
Sure. Glad you raised that because it's of course on people's minds. I mean, firstly, I guess to visualise it, it's roughly the size of a dinner plate, a cable, a subsea cable
Ellen Fraser:
In terms of the overall width of the cable, yeah?
James Humfrey:
Yeah, exactly. So it's probably smaller than people imagine, but in our case they are armoured, they are buried, which is not the case in what was happening on some of the cables in the Baltic. They're also at much greater depths, depths which are greater than anchor drag possible levels. So you can't hook-
Ellen Fraser:
Right, so you can't hook them if you like.
James Humfrey:
Yeah. So data cables historically have never been buried. Nowadays, electricity sort of cables always would be. So you've got a series of protections which aren't perhaps fully understood from some of the headlines. So therefore from our perspective, the physical security threat to cables is actually considerably less than perhaps is understood from the Baltic and so on. In fact, having done a lot of work through the security and with governments as well, we still remain convinced that IT risk is... Cyber attack is actually a much greater risk than physical risk.
Ellen Fraser:
Yeah, interesting. But that sounds partly because you've actually designed out some of the actual physical risk in the way that you've approached the cable, laying the depth, the resilience.
James Humfrey:
That's right. And another new technology, which is also a game changer, is the use of fibre and which has acoustic capabilities. So that also gives you early warning as well. It's also very important for repair and fault-finding.
Ellen Fraser:
That's a good point. If something does happen to one of the cables, what do you do?
James Humfrey:
Right. Well, actually the Basslink in Tasmania has pioneered a lot of this. I mean, effectively with the fibre and acoustic, and actually it also can sort of sense earth movement, you can pinpoint where the fault is. And on projects of our scale, you effectively have vessels on standby, which can repair actually pretty quickly.
Ellen Fraser:
Wow.
James Humfrey:
And we're talking in tens of days, it's much quicker than say a gas pipeline or something like that.
Ellen Fraser:
Yeah, interesting.
James Humfrey:
So yeah, you can actually manage that. That said, the fault rates are low, and if you've done your work properly, buried it appropriately, all of that's been done well. Actually you would expect it to last for 50 years.
Ellen Fraser:
Wow, amazing. Yeah, perfect. That's really interesting, actually. And then just thinking a little bit about you, if we can, and your career journey. What are some of the pivotal moments in your career that led up to where you are now as a CEO of Xlinks?
James Humfrey:
Well, I think probably first 10 years of my career I was basically doing P&L jobs and sort of sales jobs, and then I switched into doing capital project development. So that was probably, I guess, moment number one.
Ellen Fraser:
With requalification as part of that process or did you learn on the job?
James Humfrey:
It was pretty much learning on the job, to be honest, but with great support from colleagues and with training as well. So I think that was probably switch number one. And then I think also when I moved to ADNOC and we were developing their new energies business, and that was probably the other sort of big switch. And finally, I guess as you get more senior, you get bigger communities to lead and look after people. And that's also kind of great training.
Ellen Fraser:
Yeah, amazing. And almost in the rearview mirror, if you were to advise your younger self, or if you were to advise somebody else coming up behind you who aspired to be the CEO of Xlinks or an equivalent organisation in the future, what guidance would you give?
James Humfrey:
Well, probably do one thing I haven't done very well, which is make better use of mentors.
Ellen Fraser:
Yeah, interesting.
James Humfrey:
And if I say people are so willing to give advice and then that advice is sort of tailored to your context and particular situations and decisions. I think I've had some wonderful mentors and support. Actually, I think I should have asked for more help.
Ellen Fraser:
Could've done more.
James Humfrey:
So I would definitely say that
Ellen Fraser:
Clocking that quite early in your career I think is quite important as well.
James Humfrey:
Yeah, some people I think get that early on and some don't. So that would definitely be one. I think another one you can do is accelerate your learning actually. As you go through events and experiences, really being a bit more systematic about creating your checklists and playbooks and recording your learning so that they're really there. I think you can accelerate your learning if you put more effort into that.
Ellen Fraser:
Yeah, interesting.
James Humfrey:
And the other probably obvious one, but I remember being given this advice is go for tough jobs. And if you're in a corporate environment, you might as well take risky jobs.
Ellen Fraser:
By tough jobs your mean stretch and-
James Humfrey:
Stretch, exactly. Stretch, which aren't easy, which will push you.
Ellen Fraser:
Get comfortable being uncomfortable.
James Humfrey:
Comfortable being uncomfortable, push you to do stuff you haven't done before and of course that's how you learn. And I think especially in a corporate environment, you should take risk. It's fundamentally a fairly safe place, and therefore stretch yourself, take those risks. I think those-
Ellen Fraser:
And are you comfortable that sometimes those risks perhaps don't play off because you take risks and it doesn't always turn out your way, right?
James Humfrey:
Yeah. I mean you need to be, and everyone's got their own different risk-
Ellen Fraser:
Appetite.
James Humfrey:
... appetite, and also I think maybe risk appetite changes at different times of your life and so on. So it's not even a constant thing. Everyone's obviously got to do what's right for them. But I remember it was Dan Pink's book on regret, where one of his big conclusions, having interviewed thousands of people about their regrets over life, is generally the regrets are things that people haven't done, not things that they have done. And I think that applies to careers as well. In general, I would say go for it. If you're on the fence on something, you're probably better off plunging.
Ellen Fraser:
Be brave.
James Humfrey:
Be brave.
Ellen Fraser:
Yeah, amazing. And that's good advice, right? Because it's very easy to stay being comfortable. In certain moments in life, you might have young children or responsibilities, it's probably not the right time to do that, but, yeah.
James Humfrey:
Exactly and that's why, yeah, I think generic advice is interesting, but in the end, everyone's situation's going to be unique and-
Ellen Fraser:
Yeah, which comes back a little bit to your mentor point, right? Seek advice from others.
James Humfrey:
Exactly. Seek advice, talk it over. You know how that is, when you're talking, even as you talk to someone and you're doing the talking, you're actually sort of that reflection-
Ellen Fraser:
Processing.
James Humfrey:
... processing is actually really helpful.
Ellen Fraser:
The coaching conversation. Yeah, amazing. James, it's been an absolute pleasure. Thank you so much for joining us. It's been an absolutely pleasure to hear about your experiences, et cetera, as you've moved through the Xlinks journey.
James Humfrey:
Well, thank you. I know it's been great. And actually I noticed the 25 years of Baringa sign flashing, so congratulations to all of you because that's a big achievement.
Ellen Fraser:
Yeah yeah, it's a real celebration. It's quite a milestone. Yeah, absolutely. And to our viewers and listeners, thank you so much for joining us for this edition of the Energy Innovators Podcast. Please do watch out for further editions.
