It’s widely agreed that one of the best ways to reduce carbon emissions around the globe is to bring on-line more renewable energy. However, the current century-old grid system presents challenges to this goal, with inefficient infrastructure and independent grid systems.
Moreover, new transmission and distribution projects potentially face significant delays related to right-of-way issues, such as permits for crossing waterways or resistance from residential neighborhoods, as well as limited financing options related to high upfront investments.
Collectively, these issues are slowing the rollout of renewable energy projects.
That’s where high-voltage direct current (HVDC) transmission systems come in. HVDC can be more expensive to build, but is more cost-effective over the long term compared to the more common alternating current (AC) systems. Despite the upfront costs, HVDC is rising in popularity around the globe for its ability to interconnect grids across borders, allow three times as much power to be transferred over longer distances — like from a remote wind farm to an urban metropolis — and control intermittent power with the lowest loss of energy.
So while HVDC systems aren’t new, they’re now seeing significant uptake. In fact, the global HVDC market, which is currently valued at $6.2 billion, is expected to reach $14.36 billion by the end of 2026, according to a report by Future Market Insights.
An HVDC transmission system is the renewable energy industry’s best bet for expediting the deployment of cheap, clean power for our everyday electricity needs. But urgent policy support around regulations and financing is needed for HVDC technology to continue on its positive trend.
Today's market challenges
According to the U.S. Department of Energy, the grid currently delivers around 3,857 terawatt-hours of electrical energy from electric power generators to 159 million residential, commercial and industrial customers. However, projections show U.S. energy demand will increase by 0.4 percent from 2016 to 2050, according to the Energy Information Association (EIA). And that growth will require more investment in new transmission and distribution (T&D) infrastructure to sustain demand and replace aging infrastructure.
Lower capital costs and the availability of tax credits will boost short-term wind and solar energy additions, according to the EIA’s 2017 Annual Energy Outlook report. The availability and accessibility of renewable energy will continue to be competitive with commodities like coal and gas, and is projected to be economical even without tax credits. While this is good news for future electricity costs and our environment, financing and right-of-way challenges still pose barriers to expediting a renewable energy utopia.
Community opposition to local right-of-way paths, due to the environmental and visual impacts of overhead T&D lines, can hinder the permitting process for installation of new infrastructure. HVDC technology can overcome this by allowing for the use of insulated cables in both submarine and underground applications. HVDC infrastructure enables more power to be transmitted with less electricity loss across long water crossings, or allows lines to be buried out of sight adjacent to roads, railways and tunnels, which may accelerate the permitting process compared to AC or overhead DC transmission alternatives.
HVDC lines can also be installed on existing AC networks or run adjacent to them, which minimizes the need for additional right-of-way land use. HVDC can transmit up to three times as much power through the same size right-of-way as the equivalent AC circuit. Alternatively, the same amount of power can be run down a narrower right-of-way using HVDC, thereby reducing environmental impact.
To address financing challenges, whether through debt, equity or a combination of the two, investor-owned utilities, public power utilities and cooperative entities must pay close attention to the cost of capital for infrastructure projects. Utility investments are typically managed by regulators to ensure adequate incentives for investors and cost efficiency gains for transmission line owners.
Investment risks are highly affected by the regulatory framework of transmission networks. Cost-based and incentive-based regulations are the two main approaches to incentivizing HVDC investments, and will vary depending on the type of asset ownership.
Cost-based regulation is characterized by a fixed rate of return based on incurred costs, meaning costs are fully passed on to the energy consumer. In this scenario, operators are not at risk of fluctuating consumer demand and can obtain a lower cost of capital as a result of lower risk exposure. By comparison, incentive-based regulation is based on the average or highest-performing industry peers, where efficiency of incurred costs determines the return on investment.
Ultimately, investors of HVDC systems will look for mechanisms like cost pass-through to offset any risk of delivery delays or unexpected additional costs related to the planning and construction phase of an HVDC project. Once operational, however, an incentive-based structure to capitalize on the higher ROI of more efficient HVDC technology may be preferred.
Where and how HVDC supports renewables
If the financial and regulatory challenges facing the deployment of HVDC transmission systems are successfully overcome, HVDC technology will expedite the transition to a renewable energy future.
Take the Plains & Eastern Clean Line project, for instance, a privately funded project between Clean Line Energy and GE, announced November 2016. The Clean Line project is currently under development, and once complete, it will be the first and largest overhead line HVDC project in the U.S. in more than 20 years. This 720-mile electric transmission infrastructure project will enable the delivery of 4,000 megawatts of low-cost clean energy from the Oklahoma Panhandle region to power more than 1 million homes in Arkansas, Tennessee and other states in the Mid-South and Southeast U.S.
In Germany, GE and TenneT’s Dolwin offshore wind HVDC project, scheduled for completion in 2018, will help the country increase its wind power use by 50 percent, while preventing approximately 17 million tons of carbon dioxide equivalent emissions per year. The latest installment of this project, Dolwin3, is the third grid connection of the Dolwin wind farm cluster, located in the southwestern region of the North Sea. Once complete, this offshore grid connection project will feed up to 900 megawatts of wind energy to the German grid, and allow the delivery of clean energy to approximately one million German households.
And in Brazil, GE’s Rio Madeira 10-gigawatt hydroelectric HVDC project transports two-thirds of the energy produced from the hydro plant in the Amazon basin across more than 1,475 miles — the world’s longest power transmission link — to 44 million residents living in the southeastern populated areas around São Paulo.
To date, GE has designed, delivered and installed more than 40 gigawatts of HVDC capacity globally in a broad range of applications and environments.
Other digital and technological advances to modernize the grid, such as demand response, hybrid battery storage and customer-owned solar generation, will contribute significantly to the evolution of the renewable energy landscape, but only as far as the infrastructure will take it.
Flexibility for managing clean energy
Today, electricity networks are rapidly changing, both on the generation and demand side. The traditional picture has been one of a number of large, discrete power sources supplying consumers based on well-understood demand patterns via T&D networks. The future sees a highly variable generation mix of large power sources, including renewables, plus considerable input from distributed energy sources such as consumer solar power, together with a less predictable demand.
HVDC not only gives the ability to integrate the bulk power from renewable sources, but also brings the flexibility to manage the challenges of the new energy generation and demand requirements.
In the next few decades, large investments in the T&D sector will spur the replacement of aging infrastructure, enable more renewable energy generation to be brought into the mix, and connect low-cost energy from remote locations across borders to the communities that need it most. Increasing energy consumption demands, combined with a lower cost of capital and greater availability of cheap, renewable energy, especially in the wind corridor, will provide an opportunity for transmission operators to re-evaluate future capacity planning.
HVDC is a highly versatile and economical solution that will not only support profitability goals for utilities, power plants, renewable generation owners and grid operators alike, but will also expedite the renewable energy future to bring cleaner, cheaper and more reliable power to all.
Patrick Plas is general manager of HVDC and grid solutions at GE Energy Connections.
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