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Kristoffer Torvik

Senior Research Analyst

Bob Lockhart

Research Director

Executive Summary: High-Voltage Direct Current Transmission Systems HVDC Converters, Cables, Submarine Interconnections, Multiterminal Grids, and Hybrid Breakers: Global Market Analysis and Forecasts

NOTE: This document is a free excerpt of a larger report. If you are interested in purchasing the full report, please contact Navigant Research at [email protected].

Published 4Q 2013

RESEARCH REPORT

High-Voltage Direct Current Transmission Systems

©2013 Navigant Consult ing, Inc. Notice: No material in this publication may be reproduced, stored in a retrieval system, or transmitted by any means, in whole or in part, without the express writ ten permission of Navigant Consult ing, Inc.

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Section 1EXECUTIVE SUMMARY

1.1 Market Overview

The interconnected power grid began with a centralized generator and a direct current (DC) transmission line in New York City in 1882. However, in the last 100 years most grids have been built using alternating current (AC). More recent innovations in power electronics complement and extend AC systems with reliable, energy efficient, and high power HVDC voltage conversion and power transmission. As of 2013, New York City is once again powered by DC. Up to 660 MW of its load demand is supplied through a back-to-back high-voltage direct current (B2B HVDC) converter in New Jersey. While the Hudson Transmission Partners (HTP) project in New York and New Jersey represents just one short link in the power system – the most complex machine in the world – it signifies the potential for HVDC to creatively solve the most demanding problems in transmission all over the world.

In the Asia Pacific region, load growth and electric consumption outpaces infrastructure development. In China alone, nearly 200 GW of new HVDC transmission capacity is planned for build-out over the next 8 years. Energy from hydroelectric generation in distant inland locations will be tapped and transported to power the big cities along the eastern and southern coast.

Overall, Navigant Research estimates that the HVDC transmission market constitutes approximately 333 GW of new transmission capacity between 2013 and 2020. For comparison, peak demand in the United States is estimated to be approximately 800 GW in 2013.

1.2 HVDC Drivers

Growth in electricity demand is only one driver in the growth of HVDC. Adverse effects of transmission system congestion and instability need to be fixed. HVDC allows interconnection of regional systems that operate asynchronously, which mitigates many instability issues that otherwise would cause outages in AC transmission. Line loss in long-distance transmission is another problem that HVDC addresses. HVDC transmission can be twice as efficient as AC transmission and requires narrower corridors (i.e., less land) than its AC equivalent. In addition, HVDC undersea cables can transmit energy over long distances, which is one limitation of AC cables without additional compensation.

Yet, AC transmission leads the transmission industry overall. Many transmission utilities have doubted classic, line-commutated HVDC solutions that were limited in their capability to rebuild the grid after an outage. In next-generation HVDC solutions, the utility industry is offered black start capability. The voltage source converter (VSC) can be operated independently of any faulted or de-energized grids downstream; it can also be used to start a blacked out system or to energize an offshore platform from onshore generators. A VSC HVDC system can be



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connected to a weak AC network or to a network where no generation exists. In the upper range, the VSC HVDC technology now reaches 1,800 MW and ± 500 kV.

Also covered in this report are indirect but powerful market drivers such as integration of new resources, including renewables, resulting from the decommissioning of nuclear and coal-fired generation. Offshore wind is experiencing remarkable interest and growth, especially in Europe. Several governments in Europe have established frameworks and even stipulated offshore wind targets. In turn, utilities are implementing aggressive plans for offshore wind development, which has created a market demand for advanced, offshore HVDC solutions.

Counterarguments to HVDC are discussed as well. Market challenges include costs and concerns related to permissions to use land, high growth in distributed generation, falling natural gas prices (favoring coal-to-gas rather than coal-to-remote renewables), integration of remote resources, and regulatory hurdles. Uncertainties related to regulatory framework is discussed by region.

1.3 Key HVDC Technologies

HVDC systems consist of equipment and engineering, procurement, and construction (EPC) components, including: converter stations, transformers, thyristor valves, insulated-gate bipolar transistors, filters, controls, terminations, guarantees, commissioning, civil and electrical engineering, buildings/platforms, land use, towers, and miles of overhead conductors or underground cables. For the purposes of this report, Navigant Research focuses on HVDC smart equipment and provides market forecasts for HVDC converters.

Therefore, Navigant Research’s technology discussions revolve around converters, cables, and the new HVDC applications on the roadmap including submarine interconnections, multiterminal grids, and hybrid breakers. The hybrid breaker recently earned one company a spot on MIT’s list of most disruptive companies in 2013. The hybrid breaker elegantly addresses the century-old protection engineering problem of quenching DC fault currents before the temporary overload causes damage. Vendors are developing different solutions, but they all have the same target in mind: to stop DC fault currents in 5 ms flat.

1.4 HVDC Project Survey and Market Forecasts

In a departure from Navigant Research’s previous HVDC report published in 2012, this edition of the report forecasts only HVDC converter revenue. Unlike in the previous edition, Navigant Research has chosen to exclude EPC costs as part of the revenue since that revenue does not necessarily accrue to vendors of smart grid technologies. For example, it is highly unlikely that a manufacturer of HVDC converters would recognize any revenue from utilities’ ROW acquisitions. This makes the forecast lower than the previous edition because it now considers only revenue to smart grid technology vendors rather than total project expenses by utilities.

An inventory of HVDC systems in construction or announced/planned is the basis for the forecasts in this report. HVDC project costs, when reported, use what is referred to as overnight costs. Navigant Research took a conservative approach and modeled converter



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revenue as overnight costs that occur in the completion year. That is, all the revenue for a converter project at its completion is recognized.

Overall, the global market for HVDC is growing at a steady pace. Based on the project inventory and conversations with vendors and project developers, Navigant Research forecasts that global cumulative HVDC converter revenue will amount to $56.6 billion in 2020. Interest in VSCs has grown, and Navigant Research forecasts growth in demand for this technology. Notably, submarine HVDC transmission is an industry segment that is taking advantage of VSCs. This segment is expected to constitute 19% of total new HVDC capacity between 2013 and 2020.

Chart 1.1 Cumulative HVDC Converters Revenue by Region, World Markets: 2013-2020

(Source: Navigant Research)

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

2013 2014 2015 2016 2017 2018 2019 2020

($ M

illio

ns)



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Section 8TABLE OF CONTENTS

............................................................................................................................................................ 1 Section 1

Executive Summary .......................................................................................................................................... 1

1.1 Market Overview ................................................................................................................................. 1

1.2 HVDC Drivers ..................................................................................................................................... 1

1.3 Key HVDC Technologies ..................................................................................................................... 2

1.4 HVDC Project Survey and Market Forecasts ........................................................................................ 2

............................................................................................................................................................ 4 Section 2

Market Issues .................................................................................................................................................... 4

2.1 Introduction ........................................................................................................................................ 4

2.2 Market Drivers .................................................................................................................................... 4

2.2.1 Long-Distance Transmission and Cost Considerations .................................................................... 5

2.2.2 Esthetics ...................................................................................................................................... 6

2.2.3 Decommissioning of Nuclear and Coal Power Plants ...................................................................... 7

2.2.4 Onshore Wind .............................................................................................................................. 8

2.2.5 Offshore Wind and Submarine Interconnectors ............................................................................... 9

2.2.6 Synergistic Operation of Wind and Hydropower .............................................................................. 9

2.2.7 Electricity Demand and Load Centers ........................................................................................... 10

2.3 Market Challenges ............................................................................................................................. 11

2.3.1 Land Use .................................................................................................................................... 11

2.3.2 Capital Intensive Technology ....................................................................................................... 11

2.3.3 Distributed Generation and Microgrids .......................................................................................... 12

2.3.4 Falling Natural Gas Prices, Coal-to-Gas........................................................................................ 13

2.3.5 Regulatory Policies ...................................................................................................................... 15



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2.4 Market Trends and Opportunities by Region ........................................................................................ 15

2.4.1 North America ............................................................................................................................. 16

2.4.1.1 Regulatory Policies in the United States ................................................................................... 19

2.4.1.2 Uncertainties in the North American Market .............................................................................. 20

2.4.2 Europe ........................................................................................................................................ 21

2.4.2.1 Regulatory Policies in Europe .................................................................................................. 23

2.4.2.2 Uncertainties ........................................................................................................................... 23

2.4.3 Asia Pacific ................................................................................................................................. 23

2.4.3.1 Regulatory Policies in China .................................................................................................... 25

2.4.3.2 Regulatory Policies in India ..................................................................................................... 25

2.4.3.3 Uncertainties ........................................................................................................................... 25

2.4.4 Rest of the World ......................................................................................................................... 26

2.4.5 Subsea Cables ............................................................................................................................ 26

........................................................................................................................................................... 27 Section 3

Technology Issues ........................................................................................................................................... 27

3.1 Introduction to HV Transmission ......................................................................................................... 27

3.1.1 HVDC ......................................................................................................................................... 27

3.1.2 HVAC and HVDC Compared ......................................................................................................... 28

3.1.3 HVDC and Voltage Levels ............................................................................................................ 30

3.2 Primary Components of HVDC Systems .............................................................................................. 31

3.2.1 Converter Technology .................................................................................................................. 31

3.2.1.1 Current-Source Converter ........................................................................................................ 32

3.2.1.2 Voltage-Source Converters ...................................................................................................... 33

3.2.2 Cables and Conductors ................................................................................................................ 35

3.2.2.1 Mass-Impregnated Submarine and Underground Cables ........................................................... 35



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3.2.2.2 Extruded Submarine Cables .................................................................................................... 36

3.2.2.3 Overhead Conductors .............................................................................................................. 36

3.2.3 HVDC System Configurations and Operating Modes ...................................................................... 37

3.2.4 Connecting HVAC Grids ............................................................................................................... 38

3.3 HVDC Roadmap ................................................................................................................................ 38

3.3.1 Submarine Interconnections ......................................................................................................... 38

3.3.1.1 Submarine National Grid Interconnections ................................................................................ 39

3.3.1.2 Connecting Wind Farms and Offshore Power Generation .......................................................... 41

3.3.1.3 HVDC Power Supply to Offshore Facilities ................................................................................ 43

3.3.2 Converter Technology .................................................................................................................. 44

3.3.3 Multiterminal Operations .............................................................................................................. 45

3.3.3.1 Use Case: Atlantic Wind Connection ........................................................................................ 45

3.3.3.2 Use Case: Quebec-New England Interconnection ..................................................................... 46

3.3.3.3 Use Case: Pacific DC Intertie ................................................................................................... 46

3.3.4 Hybrid HVDC Breakers ................................................................................................................ 47

3.3.5 Superconductors ......................................................................................................................... 48

........................................................................................................................................................... 51 Section 4

Key Industry Players ........................................................................................................................................ 51

4.1 HVDC Suppliers ................................................................................................................................ 51

4.1.1 ABB ............................................................................................................................................ 51

4.1.2 Alstom ........................................................................................................................................ 51

4.1.3 AMSC ......................................................................................................................................... 52

4.1.4 Schweitzer Engineering Laboratories ............................................................................................ 52

4.1.5 Siemens AG ................................................................................................................................ 53

4.2 Large Power Grid Operators ............................................................................................................... 53



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4.2.1 China Southern Power Grid Co., Ltd. (CSG) .................................................................................. 53

4.2.2 DONG Energy ............................................................................................................................. 54

4.2.3 EDP ............................................................................................................................................ 54

4.2.4 E.ON ........................................................................................................................................... 55

4.2.5 GDF Suez ................................................................................................................................... 55

4.2.6 Iberdrola ..................................................................................................................................... 55

4.2.7 Korea Electric Power Corporation ................................................................................................. 56

4.2.8 Power Grid Corporation of India Ltd. (POWERGRID) ..................................................................... 56

4.2.9 RWE Innogy ................................................................................................................................ 56

4.2.10 State Grid Corporation of China (SGCC) ....................................................................................... 57

4.2.11 Statnett ....................................................................................................................................... 57

4.2.12 TenneT ....................................................................................................................................... 58

4.2.13 Vattenfall .................................................................................................................................... 59

4.3 Cable and Cable Equipment Manufacturers ......................................................................................... 59

4.3.1 LS Cable & System ...................................................................................................................... 59

4.3.2 Nexans ....................................................................................................................................... 60

4.3.3 nkt cables ................................................................................................................................... 60

4.3.4 Prysmian ..................................................................................................................................... 60

........................................................................................................................................................... 62 Section 5

Market Forecasts.............................................................................................................................................. 62

5.1 Introduction ....................................................................................................................................... 62

5.2 Forecasting Approach ........................................................................................................................ 62

5.2.1 Pricing Assumptions .................................................................................................................... 63

5.3 Global HVDC Market Forecast ............................................................................................................ 63

5.3.1 Global HVDC Converter Market .................................................................................................... 64



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5.3.2 Global Submarine HVDC Converter Market ................................................................................... 66

5.4 Conclusions and Recommendations ................................................................................................... 68

........................................................................................................................................................... 70 Section 6

Company Directory .......................................................................................................................................... 70

........................................................................................................................................................... 72 Section 7

Acronym and Abbreviation List ....................................................................................................................... 72

........................................................................................................................................................... 76 Section 8

Table of Contents ............................................................................................................................................. 76

........................................................................................................................................................... 81 Section 9

Table of Charts and Figures ............................................................................................................................. 81

.......................................................................................................................................................... 84 Section 10

Scope of Study ................................................................................................................................................. 84

Sources and Methodology ............................................................................................................................... 84

Notes ................................................................................................................................................................ 85



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Section 9TABLE OF CHARTS AND FIGURES

Chart 1.1 Cumulative HVDC Converters Revenue by Region, World Markets: 2013-2020 ................................ 3

Chart 2.1 Electricity Demand by Region, World Markets: 2010-2020 ............................................................. 10

Chart 5.1 New Annual HVDC Capacity by Region, World Markets: 2013-2020 ............................................... 64

Chart 5.2 Annual HVDC Converter Revenue by Region, World Markets: 2013-2020 ....................................... 65

Chart 5.3 Annual HVDC Converter Revenue by Type, World Markets: 2013-2020 .......................................... 66

Chart 5.4 Cumulative New Submarine HVDC Capacity, by Region, World Markets: 2013-2020 ....................... 67

Chart 5.5 Total HVDC Converter Revenue for Submarine Transmission by Region, World Markets:

2013-2020 ................................................................................................................................... 68

Figure 2.1 Economic Tradeoffs Quantified, HVAC and HVDC .......................................................................... 5

Figure 2.2 Economic Tradeoffs: HVAC and HVDC .......................................................................................... 6

Figure 2.3 Actual and Announced Coal-Fired Retirements, United States: 2011-2020 ....................................... 7

Figure 2.4 Electricity Production in Germany: June 17-23, 2013 ..................................................................... 13

Figure 2.5 Production, Export, and Import of Electricity in Germany: June 17-23, 2013 ................................... 13

Figure 2.6 Monthly Electricity Production by Fuel Type, United States: 2010-2012 .......................................... 14

Figure 2.7 Coal and Natural Gas Prices, United States: 2002-2012 ................................................................ 15

Figure 2.8 Electricity Reliability Councils in the United States and Québec, Canada ........................................ 16

Figure 2.9 Regional Transmission Operators ................................................................................................. 17

Figure 2.10 2050 Goals for Renewable Generation, European Union ................................................................ 21

Figure 3.1 Capacity Improvements, HVDC Classic Converter Technology: 1970-2010 ..................................... 27

Figure 3.2 Right-of-Way Benefits of HVDC Transmission ............................................................................... 28

Figure 3.3 Maximum Real Power Transfer for AC Subsea Cables ................................................................... 30

Figure 3.4 Generic Converter Station Layout ................................................................................................. 31



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Figure 3.5 Evolution of Converter Technology Capacity: 1970-2011 ............................................................... 32

Figure 3.6 Thyristor, Module, and Valve ........................................................................................................ 33

Figure 3.7 Chuxiong Converter Station .......................................................................................................... 33

Figure 3.8 Shoreham HVDC Converter Station .............................................................................................. 34

Figure 3.9 Mass-Impregnated Submarine Cables ........................................................................................... 35

Figure 3.10 HVDC XLPE Submarine and Underground Cables ......................................................................... 36

Figure 3.11 HVDC System Configurations ....................................................................................................... 37

Figure 3.12 Submarine National Grid Interconnectors in Northern Europe ......................................................... 39

Figure 3.13 Maximum Real Power Transfer, AC Subsea Cables ....................................................................... 40

Figure 3.14 2030 Offshore Grid Vision of European Wind Energy Association ................................................... 41

Figure 3.15 Horns Wind Turbine Cable Installation Schematic .......................................................................... 42

Figure 3.16 Beatrice Offshore Wind Farm and Oil Platform .............................................................................. 43

Figure 3.17 VSC Technology Advances .......................................................................................................... 44

Figure 3.18 Map of Atlantic Wind Connection .................................................................................................. 46

Figure 3.19 Hybrid DC Breaker Concept ......................................................................................................... 47

Figure 3.20 Multiterminal Operation with and without Circuit Breakers .............................................................. 48

Figure 3.21 Superconductor Wire Components ................................................................................................ 49

Figure 3.22 Superconductor Cables ................................................................................................................ 49

Figure 3.23 Tres Amigas Hub ......................................................................................................................... 50



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Table 2.1 HVDC Lines, Planned or Under Construction, North America: 2013-2020 ....................................... 18

Table 2.2 HVDC Lines, Planned or Under Construction, Europe: 2013-2020 .................................................. 21

Table 2.3 HVDC Lines, Planned or Under Construction, Asia Pacific: 2013-2020 ........................................... 24

Table 2.4 HVDC Lines, Planned or Under Construction, Rest of World: 2013-2020 ........................................ 26

Table 3.1 Average and Cumulative HVDC Capacity by Voltage Level, World Markets: 2013-2020 ................... 30

Table 3.2 Current Converter Technology Capacity Limits by Vendor and Type ............................................... 44



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Section 10SCOPE OF STUDY

Navigant Research has prepared this report to provide participants in the transmission market (including HVDC equipment manufacturers, utilities, project developers, EPC providers, and other system component manufacturers) with a study of the global market potential for HVDC technologies. Such technologies include voltage- and current-source converters (VSCs and CSCs) and high-voltage cables.

The report’s purpose is not to provide an exhaustive technical assessment of all of the technologies and industries that may be related to HVDC deployments. Rather, it aims to offer a strategic examination of the HVDC market, key technology issues, regulatory factors, customer demand dynamics, and the competitive landscape. Navigant Research strives to identify and examine new market segments to aid readers in the development of their business models. All major global regions are included and the forecast period extends through 2020.

SOURCES AND METHODOLOGY

Navigant Research’s industry analysts utilize a variety of research sources in preparing Research Reports. The key component of Navigant Research’s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community.

Additional analysis includes secondary research conducted by Navigant Research’s analysts and its staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report.

These primary and secondary research sources, combined with the analyst’s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Navigant Research’s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients.

Navigant Research, a part of the Navigant Consulting, Inc. Energy Practice, is a market research group whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. Navigant Research is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets.



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NOTES

CAGR refers to compound average annual growth rate, using the formula:

CAGR = (End Year Value ÷ Start Year Value)(1/steps) – 1.

CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well.

Figures are based on the best estimates available at the time of calculation. Annual revenue, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2013 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding.



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Published 4Q 2013

©2013 Navigant Consulting, Inc. 1320 Pearl Street, Suite 300 Boulder, CO 80302 USA Tel: +1.303.997.7609 http://www.navigantresearch.com

This publication is provided by Navigant Research, a part of Navigant Consulting, Inc. (“Navigant”), and has been provided for informational purposes only. This publication is intended for the sole and exclusive use of the original purchaser under terms and conditions agreed to by the parties. This publication may not otherwise be reproduced, recorded, photocopied, distributed, displayed, modified, extracted, accessed, or used without the express written permission of Navigant. Navigant makes no claim to any government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication), and makes no express or implied warranty, guaranty, or representation concerning the information contained in this publication, its merchantability, or its fitness for a particular purpose or function. Any reference to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply an endorsement, recommendation, or favoring by Navigant. Navigant does not assume, and hereby disclaims, any liability that may result from any reliance on or use of any information contained in this publication, or for any loss or damage caused by errors or omissions in this publication. If you do not have permission from Navigant covering this publication, please refrain from accessing or using this publication. Please contact Navigant at [email protected] to obtain permission to use this publication.

©2013 Navigant Consulting, Inc. Notice: No material in this publication may be reproduced, stored in a retrieval system, or transmitted by any means, in whole or in part, without the express written permission of Navigant Consulting, Inc.

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