|State-of-the-art high-voltage test facility
|The laying of the BritNed 450 kV HVDC cable system, connecting the UK and the Netherlands, took place in 2009
Recent technological advances in high-voltage direct current (HVDC) transmission has led many to see it as a crucial element in an efficient, smart power system of the future, providing power corridors connecting distant supply and demand centres, with minimal energy losses.
With its strong central control, China is implementing the biggest and most rapid roll-out. At the same time it is developing a HVDC manufacturing base that is displacing imports, and could eventually challenge the handful of established global players, helping to keep a lid on prices as the global market takes off.
Today, a long distance 800 kV HVDC line loses just 3.5 per cent per 1000 km, and is able to transmit many gigawatts of power. These attractive credentials have led to a dramatic expansion in the number of planned 7HVDC projects. If every system that has been announced for commissioning between now and 2020 is actually built, the cumulative global capital requirements for HVDC systems would be around $217 billion, according to Navigant Research.
Of the officially announced HVDC budgets and schedules, Navigant reckons only about half will be built, leading it to conclude in a 2012 report that there is an 80 per cent probability that the cumulative spending for HVDC systems between 2012 and 2020 will range between $110 billion and $120 billion. Eventually, a HVDC network could span the globe, linking low-cost and environmentally-friendly desert solar, offshore wind, geothermal and hydropower, with grid systems and demand centres across the world.
Demand outstripping supply
The first commercial HVDC system linked the Swedish mainland to the Island of Gotland in the mid-1950s. It was built by ASEA, the precursor of ABB, one of the ‘big three’ established European HVDC manufacturing giants, which also include Siemens and Alstom. But the extent of recent demand growth has left them hard-pressed to keep up, with competition also emerging from Asia.
There are a few new HVDC lines in South America, Australia, Russia and Africa, but the vast majority of new construction is occurring in Europe, North America, India and especially China. In Europe and North America, demand is driven by renewable energy integration, while in China it is also being driven by a rapidly expanding generation sector.
China is by far the biggest HVDC investor, helped by its simple planning and policy structure. Several projects have been completed or are underway, and the dominant transmission company, the State Grid Corporation of China (SGCC), has recently pushed for approval of a massive $250 billion upgrade plan, that will link regional grids via 20 HVDC power corridors by 2020. The lines would help resolve China’s geographical energy imbalance, according to SGCC. However, many also see the move as an attempt to strengthen SGCC’s monopoly on power – it controls all transmission in China apart from along the southeast coast, which is controlled by China Southern Power Grid Company.
China’s National Reform and Development Commission appears unconvinced over the plan’s cost, security and safety issues. It is likely to make a decision one way or the other by the end of this year. Because China’s energy resources lie far from demand centres along its coastal rim, the energy must be transported somehow. In a recent report, The Lantau Group and Macquarie Equity Research said the cost of moving coal by rail was comparative to transmitting power by HVDC, even if it does tie-up more than 60 per cent of the country’s rail capacity. Furthermore, as China moves its energy-intensive industry inland and west, electricity demand in the east and south may not grow as much as expected.
Nevertheless, China is still struggling to keep up with power demand driven by 30 years of explosive growth, and needs to get as much power to consumers as possible. Capacity is expected to grow to 1500 GW by 2020 from 1060 GW at the end of last year, according to China’s Energy Research Institute.
Influence of evolving power mixes
According to transmission expert, Dr Fu Yanny of DNV Kema’s ETN business line, a typical HVDC project in China takes a fifth of the time of a similar project in Europe. She says the current need for transmission expansion is being driven by renewables and generation capacity growth of 5-7 per cent per year, down from 8 per cent recently. Dr Fu points out that the generation mix will change over the next ten years away from coal, and towards renewable energy and nuclear. She says the extent of required HVDC will depend partly on how that mix pans out. The more nuclear constructed along the coast, the less will be the need for HVDC infrastructure.
“China is developing its HVDC network around a future generating mix, where thermal has been reduced from 70 per cent to 50 per cent, and nuclear increased from 1-2 per cent to at least 10 per cent,” she says, adding that more nuclear means fewer lines would be needed to bring renewable or hydropower from China’s west to coastal demand centres.
This link between the fortunes of HVDC and renewables was also noted by Malavika Tohani, Energy & Power Systems research manager at Frost & Sullivan, and not just in China: “Government policy towards renewable energy indirectly affects HVDC development. For example, offshore wind developments require connection to the main grid”.
While strong interconnection would allow flexibility, there are also concerns that China’s regional grids are too weak to receive the large amounts of power transmitted via HVDC lines. European Union and Indian officials have also expressed caution over technical issues associated with such an extensive HVDC roll-out. These concerns were dismissed by Dr Fu. “The number of [blackout/transmission] incidents in China is very small compared to its size; it depends on how the system is operated,” she says.
New technology, such as ABB’s hybrid HVDC breaker may also make it easier to use HVDC on large power grids without the fear of catastrophic breakdown, and SGCC says existing lines are working well. As long as such technical problems can be overcome, such a network should give China the boost it needs to lift network performance and keep pace with surging demand, helping its economy maintain a competitive global edge. It could in effect leapfrog the developed world in transmission network efficiency and integration.
Unlike its counterparts overseas, SGCC’s core business is to build connections between regions, in line with national macro energy planning. There is no similar body linking local national or state grids in the US or Europe. For Chinese provinces with surplus power, returns are higher if the electricity can be exported to areas of tighter supply. “It is a controlled market economy, and the price for electricity for the transmission lines is negotiated on a win-win basis with the producing province, which will get more than if it is sold locally,” Dr Fu says. With the electricity price fixed, there is still room to make money from the cheapest sources of power. “The HVDC transmission lines from the Three Gorges dam will pay for themselves in less than ten years because the power is relatively cheap”, she adds.
Last August, construction began on a west-to-east HVDC transmission project to transport about 40 billion kWh per year from the Xiluodu hydropower plant in southwest China 1700 km to the eastern province of Zhejiang from 2014. The project follows SGCC’s Xiangjiaba-Shanghai and Jinping-Sunan transmission lines, which were completed in 2010 and 2012 respectively. The three transmission lines combined will have 21.6 GW of capacity.
By 2015, SGCC’s wish-list includes three north-to-south lines and three additional west-to-east, which would transport coal-fired and wind power from the north and hydropower from the southwest. At a cost of $1.05 million per mile, this would cost SGCC over $40 billion.
Experience still counts
As with other forms of manufacturing, China has chosen the import substitution route for HVDC equipment production. SGCC’s vice president Shu Yinbiao said only recently that this trend will continue, with HVDC projects being built with an increasingly higher proportion of domestic manufacturing content.
Initially, China signed deals with ABB and Siemens based on technology transfer and partnership with local companies. Alstom was excluded for some time after it refused to agree to technology transfer, but it has since reached a compromise and has now re-engaged.
|UHVDC valve hall in converter station
Bit by bit domestic supply, however, has replaced imported equipment, to the extent that Dr Fu suggests up to five Chinese industrial groups could now be capable of developing projects outside China, including China XD Group, C-EPRI and NR Electric. This has reduced imports from the big three European manufacturers to 10-15 per cent of an average project today, she says, with the simpler components especially now readily available both locally and cheaply.
So far, however, no major projects have yet been built outside China by Chinese companies. HVDC consultant, Dr Norman MacLeod of Parsons Brinckerhoff, suggests three groups were probably capable of large parts of a project. He believes it is only a matter of time before a project in the developing world is won on a low-cost basis: “I would expect the first HVDC project [built by the Chinese] will be in Africa or the Middle East, funded with development bank money, and won with a substantial discount… This will break the mould and lead to further deals.”
A Chinese-built project in Europe or North America is thought to be further off, however: “It is difficult to enter the European or US markets because you need experience,” says Dr Fu. One route to gain that experience could be through contracts with overseas grid operations partly controlled by SGCC – already the world’s largest grid operator by far, and the seventh largest company. Over recent years, SGCC has bought grid stakes in the Philippines, Australia and Portugal (25 per cent of Redes Energeticas Nacionais), as well as lines in Brazil.
“SGCC bought into a Portuguese grid that badly needs refurbishment”, it could act as a springboard for the Chinese HVDC transmission manufacturing groups to enter the European market, postulates Dr Fu, and adds that she believes SGCC is looking to widen its investments in overseas’ grids further.
SGCC could be shaping up to be the first grid operator with global reach, but at this stage Dr Fu believes it is experimentation, and acquiring overseas’ stakes is just part of a learning process for SGCC.
“They [SGCC] don’t know if it will profitable,” she says, acknowledging the sector had traditionally been low return and heavily regulated. “If the investments don’t work then SGCC will probably sell up; it’s a learning process”, to help understand overseas markets and global best practise, rather than empire building.
Others might suggest it is part of a Chinese industrial strategy, misjudged or otherwise. But whatever the explanation, by competing with established companies, costs and prices are kept down, which benefits all consumers – in the short term at least, as can be seen in the solar sector. The danger is that innovation ceases and efficient companies go under.
Dr MacLeod says SGCC had been very aggressive in acquiring assets overseas, and he expects Chinese HVDC equipment producers to be the same. “[Chinese HVDC equipment manufacturers] are already knocking on doors, and have registered for prequalification as possible suppliers to a number of European projects,” he says. But UK and European grid operators are cautious, particularly as they are used to being supplied with a complete HVDC package by the big three, including linking into the AC system. In this respect, Chinese equipment makers are at a disadvantage as they have little experience of putting together such completely tailored packages.
Dr MacLeod notes that Japanese manufacturers, which operated in a similar environment, have been unable to export HVDC equipment so far, despite having developed advanced technology, because the “model for execution” was different, with Japanese regional power companies remaining integrated. Chinese equipment companies appear far more aggressive, however, and there is concern that dumping of equipment on overseas markets at below cost-price might occur, as the US and some EU members argue has already taken place in the solar sector.
Dr MacLeod also highlights that two South Korean companies – LSIS and Hyosung – are developing indigenous HVDC transmission technology and are also capable of moving into the international market. “HVDC is a boom market”, he says, and such a market should be able to absorb new suppliers from the Far East.
Europe takes organic path
In Europe, most HVDC development is directed to tying in new renewable energy sources using underground or submarine cable transmission, as European utility and energy companies are rarely able to gain new overhead transmission corridors. Unlike China, there is no body imposing a master-plan on the continent – although a pan-European Grid is envisaged at some point in time.
Development is expected to be incremental, and very much commercially driven. “Europe’s HVDC grid will develop organically, without the central planning of China. It will smooth out the differences in supply,” believes Dr MacLeod.
Currently, the European Network of Transmission System Operators of Electricity (ENTSO-E) – an organization that represents all European transmission grid operators – is reviewing network codes to ensure inconsistencies do not obstruct cross-border HVDC connections, and developing a HVDC code to encourage construction. “[Clear regulations] are a good starting point for developing a European HVDC grid system, but it will grow bit by bit and not by central design,” Dr MacLeod says.
Tohani of Frost & Sullivan believes the slow process of acquiring permits and project approval and a “lack of clarity for utilities, who will bear the cost of delays of connecting wind farms to the grid,” were issues that held back HVDC projects in Europe, and specifically Germany. In addition, she says delays in cable and converter supply was also a factor. The sub-market for HVDC submarine cables appears particularly constrained by shortages in specialized submarine equipment, with only a handful of manufacturers able to deliver cables at the increasing depth, capacity and length required.
The possible appearance of Chinese, or even Korean and Japanese, manufacturers could be a relief to some planners. But caution prevails in such a highly specialised field, and most experienced grid operators are unlikely to take a risk with inexperienced suppliers, despite delays, increased costs and other difficulties, which will be passed on in higher energy prices.
While several projects are going ahead or already underway, the scope for development in Europe is far more extensive. Mediterranean countries are seeking power transmission corridors to bring solar from the Sahara, while to the north, a link is envisaged to bring geothermal power from Iceland and hydropower from Scandinavia, with further links planned to offshore wind farms in northwest Europe (see HVDC grid map on opposite page).
However, part of that ambitious aspiration has taken a siginifcant knock following recent reports that the Desertec Industrial Initiative has abandoned its strategy to export solar power generated from the Sahara to Europe,
Is the US behind the curve?
As with Europe, some observers claim the US needs a better regulatory environment, as well as regional and national transmission planning, if it is to make the most of HVDC transmission to harness the full potential of renewable sources. Unlike Europe, new overhead corridors are more feasible, but involve a lengthy approval process. Utilities tend to avoid HVDC underground transmission, perceiving it to be significantly more expensive.
On the west coast of the US there are two major HVDC lines supplying southern California – the Pacific Intertie brings hydropower, while the Mountain Intertie was built to bring Utah coal-fired power but is due to switch to supplying wind power from Wyoming. A recent 64-km HVDC submarine cable across San Francisco Bay carrying 400 MW of power, built by a private investor using Siemens technology, showed that HVDC economics now often makes sense for short routes too.
Across in eastern North America, the Champlain Hudson Power Express, a 536-km HVDC cable project, will bring hydropower from Canada to New York City. The cable will be laid along rail roads or in waterways to minimise the impact on local communities and the environment.
In the Midwest, the Plains and Eastern Clean Line wind power transmission line from Oklahoma has been approved, and is gathering customers for its potential 7000 MW of clean energy. This HVDC line will be approximately 1300 km in length, and will transmit wind power to customers in the Mid-South and Texas.
HVDC in emerging economies
Integration of renewable energy is also driving HVDC development in India. The Indian government estimates that an investment of nearly $8 billion is needed to strengthen and develop transmission infrastructure for renewable power capacity additions planned during the next five years. India is working towards a single national transmission network with a cumulative capacity of about 250 GW, with the southern grid merging with the already synchronised grids of the northern, eastern, western and north-eastern regions grid by early 2014.
Elsewhere across the world, grid enhancement in Southeast Asia and Central and South America, as well as refurbishment in the Russian Federation are also providing many opportunities for new HVDC lines. In Africa, the construction of a HVDC line between Ethiopia and Kenya has gained African Development Bank funding, and will bring affordable electricity from Ethiopia’s hydro plants to energy-starved Kenyans, and set the stage for inter-regional electricity trading.
On their own such new stand-alone HVDC transmission lines can provide a massive local stimulus to economic development. If China gets to build its complete HVDC grid, and it proves to be effective, the rest of the world will want one too.
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