Indirect questions: Can you explain how you will or how will you?

[1] Can you explain to me [how you will do that]?

[2] Can you explain to me [how will you do that]?

Preliminary points: there are no objects, either direct or indirect, and "me" should be replaced by the preposition phrase "to me".

The bracketed elements are subordinate interrogative clauses (embedded questions) functioning as complement of "explain". Such clauses don't normally have subject-auxiliary inversion, so [1] is correct.

The meaning is "Can you explain to me the answer to the question 'How will you do that?'"