# Market Integration of HVDC Lines: Internalizing HVDC Losses in Market Clearing

## TL;DR

This paper proposes a comprehensive framework for incorporating HVDC and AC losses into market clearing algorithms, demonstrating that doing so can improve social welfare in regional power markets with HVDC interconnections.

## Contribution

It introduces a rigorous framework and models for including HVDC and AC losses in market clearing, ensuring increased social welfare and more accurate pricing.

## Key findings

- Including HVDC losses affects market efficiency.
- Accounting for both AC and HVDC losses improves social welfare.
- The proposed models outperform simpler loss considerations.

## Abstract

Moving towards regional Supergrids, an increasing number of interconnections are formed by High Voltage Direct Current (HVDC) lines. Currently, in most regions, HVDC losses are not considered in market operations, resulting in additional costs for Transmission System Operators (TSOs). Nordic TSOs have proposed the introduction of HVDC loss factors in the market clearing algorithm, to account for the cost of losses and avoid HVDC flows between zones with zero price difference. In this paper, we introduce a rigorous framework to assess the introduction of loss factors, in particular HVDC loss factors, in nodal and zonal pricing markets. First, we focus on the identification of an appropriate loss factor. We propose and compare three different models: constant, linear, and piecewise linear. Second, we introduce formulations to include losses in market clearing algorithms. Carrying numerical tests for a whole year, we find that accounting only for HVDC or AC losses may lead to lower social welfare for a non-negligible amount of time. To counter this, this paper introduces a framework for including both AC and HVDC losses in a zonal or nodal pricing environment. We show both theoretically and through simulations that such a framework is guaranteed to increase social welfare.