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Market Integration of HVDC Lines Cost Savings from Loss Allocation and Redispatching

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Document pages: 12 pages

Abstract: In the Nordic region, many interconnectors are formed by HVDC links, asScandinavia, Continental Europe and the Baltic region are non-synchronous ACsystems. This paper presents two cost benefit analyses on the utilization ofHVDC interconnectors in the Nordic countries: in the first we investigate theutilization of HVDC interconnectors for reserve procurement and, in the second,we assess the implementation of implicit grid losses on HVDC interconnectors inthe day-ahead market.The first analysis is motivated by real events in 2018 where the inertia ofthe Nordic system dropped below a critical level and the most criticalgenerating unit, a nuclear power plant in Sweden, was redispatched to guaranteethe security of the system. In order to guarantee system security whilereducing the costs of preventive actions, in summer 2020 new frequency productswere introduced in the Nordic system: the Fast Frequency Reserves (FFR). HVDClines, however, can perform similar tasks at lower costs. In our analysis, weare, thus, investigating the cost savings of using HVDC lines for frequencysupport using their Emergency Power Control (EPC) functionality, instead ofredispatching or FFR.The second analysis is based on the proposition of Nordic Transmission SystemOperators (TSOs) to introduce linear HVDC loss factors in the market clearing.With our analysis, we show that linear loss factors can unfairly penalize oneHVDC line over the other, and this can reduce social benefits and jeopardizerevenues of merchant HVDC lines. In this regard, we propose piecewise-linearloss factors: a simple-to-implement but highly-effective solution. Moreover, wedemonstrate how the introduction of HVDC loss factors is a partial solution,since it disproportionally increases the AC losses. Our results show that theadditional inclusion of AC loss factors can eliminate this problem.

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