HVDC Loss Factors in the Nordic Power Market

TL;DR

This paper analyzes the impact of HVDC loss factors in the Nordic power market, proposing a piecewise-linear approach to improve market fairness and reduce unintended consequences on AC losses.

Contribution

It introduces a detailed Nordic market model and evaluates different HVDC loss factor formulations, proposing a novel piecewise-linear method for better market integration.

Findings

Linear loss factors can unfairly penalize certain HVDC lines.

Piecewise-linear loss factors are simple to implement and more effective.

Including AC loss factors can mitigate increased AC losses.

Abstract

In the Nordic countries (Sweden, Norway, Finland and Denmark), many interconnectors are formed by long High-Voltage Direct-Current (HVDC) lines. Every year, the operation of such interconnectors costs millions of Euros to Transmission System Operators (TSOs) due to the high amount of losses that are not considered while clearing the market. To counteract this problem, Nordic TSOs (Svenska kraftn\"at - Sweden, Statnett - Norway, Fingrid - Finland, Energinet - Denmark) have proposed to introduce linear HVDC loss factors in the market clearing algorithm. The assessment of such a measure requires a detailed model of the system under investigation. In this paper we develop and introduce a detailed market model of the Nordic countries and we analyze the impact of different loss factor formulations. We show that linear loss factors penalize one HVDC line over the other, and this can jeopardize revenues of merchant HVDC lines. In this regard, we propose piecewise-linear loss factors: a simple to implement but highly effective solution. Moreover, we demonstrate how the introduction of only HVDC loss factors is a partial solution, since it disproportionately increases the AC losses. Our results show that the inclusion of AC loss factors can eliminate this problem.