A market-based transmission planning for HVDC grid—case study of the North Sea

Abstract

There is significant interest in building HVDC transmission to carry out transnational power exchange and deliver cheaper electricity from renewable energy sources which are located far from the load centers. This paper presents a market-based approach to solve a long-term TEP for meshed VSC-HVDC grids that connect regional markets. This is in general a nonlinear, non-convex large-scale optimization problem with high computational burden, partly due to the many combinations of wind and load that become possible. We developed a two-step iterative algorithm that first selects a subset of operating hours using a clustering technique, and then seeks to maximize the social welfare of all regions and minimize the investment capital of transmission infrastructure subject to technical and economic constraints. The outcome of the optimization is an optimal grid design with a topology and transmission capacities that results in congestion revenue paying off investment by the end the project's economic lifetime. Approximations are made to allow an analytical solution to the problem and demonstrate that an HVDC pricing mechanism can be consistent with an AC counterpart. The model is used to investigate development of the offshore grid in the North Sea. Simulation results are interpreted in economic terms and show the effectiveness of our proposed two-step approach.