Electricity: the “coffee” of international energy markets
October 15, 2020
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Phil Devine

We live in a global economy and like any other resource, electricity can be shared, bought and sold between different countries with different languages, currencies and cultures. Just as countries must find common ground to work together, electrical networks must connect very different infrastructures in order to make trade possible, across political, financial and physical frontiers.

International electricity trading

International sales revenue from electricity exports by country totaled US$33 billion in 2019. Europe sold the highest dollar worth of exported electricity during 2019 with shipments valued at $22.7 billion or more than two-thirds (68.6%) of the global total.[1]

Electricity is traded like other commodities, and yet, electricity is different in that it can’t be stored – at least not currently in the quantities necessary for international trading considerations. And as the world is transitioning to more renewable energy resources like wind and solar, utility-scale renewable power plants generate electricity where the necessary resources are located, typically in remote areas where the fuel (sunlight or wind) is most abundant. Indeed, a key business driver of cross-border HVDC links is the potential for electricity trade, reinforced by renewable resource availability in different countries with price variances.

What’s coffee got to do with it?

Did you know that over 2.25 billion cups of coffee are consumed worldwide daily? That must be why coffee is the second most traded commodity in the world behind crude oil. But imagine for a minute what the coffee market would be like if there was no efficient way to transport the beans from Brazil or Colombia, for example, to Finland where they can’t grow it themselves, but where they drink the most coffee per capita than any other country in the world[2].

What would happen if there wasn’t a practical way to transport globally traded commodities like coffee? In today’s world, the means to get the goods you’re selling to your buyer(s) is a critical link in the supply chain. If you don’t have an efficient mechanism to deliver your goods, you’re not going to survive in a global economy.

The Finns have different words for coffee depending on the situation. Saunakahvi translates to sauna coffee. Vaalikahvit is coffee drank after voting in an election, and Matkakahvi is traveling coffee. Extending the analogy, electricity is the matkakahvi of international energy markets and it needs an efficient, cost-effective mechanism in which to be distributed.

That’s where HVDC networks come in.

HVDC, electricity’s superhighway

The benefits of HVDC are well known. It helps stabilize power grids, increases security of supply and integrates renewable energy resources at a much larger scale. In the case of inter-regional and cross-border interconnections, HVDC has the added benefit of greater efficiency of power transmission over long distances when compared to HVAC. On average, HVDC lines lose about 3.5% of their power per 1,000 kilometers, compared with 6.7% for AC lines.[3]

Additionally, since HVDC is frequency independent, it can be used as an interconnection/intertie between asynchronous AC networks across borders allowing networks to exchange power, further facilitating international energy markets.

Accelerating progress toward net-zero

HVDC technology isn’t new. From its beginnings in the 1930’s in Sweden and Germany to today with the longest HVDC link in China over 3,300 kilometers long and a capacity of 12 GW, the need for this technology is only growing. In fact, the UK currently has the largest offshore wind capacity of any country, as well as four of the top five largest developments, they recently doubled-down by raising their target for offshore wind power capacity from 30 gigawatts to 40 gigawatts by 2030.[4]

And how does the electricity get from the turbines miles offshore back to land to be distributed? That’s right, HVDC interconnectors.

International interconnections

One such offshore wind project underway is called Harmony Link between Lithuania and Poland linking the Baltic transmission system and the synchronous grid of Continental Europe via the Baltic Sea. The purpose of this interconnection is to synchronize the Baltic states’ power grids with that of continental Europe. This would lay a foundation for energy security as well as continued electricity trading.

The UK currently has five such international links in service to Ireland, Northern Ireland, France, Holland and Belgium with three more due in service in the next 12 to 24 months. There are four more expected in the next five years and several more in the planning phase. These interconnectors have a high utilization rate and are used for energy trading during periods of imbalance in prices and generation, as well as for security of supply.

The UK also has two sub-sea HVDC links that are internal to its network and are used to regulate the transmission of electrical energy and ease bottlenecks. There are more of these planned in the years ahead as well.

HVDC: an economic and environmental facilitator

With greater utilization of transmission capacity, utilities and private operators alike can support a higher level of energy trading in the power exchanges, which in turn drives an increase in overall value-creation opportunities. HVDC and cross-border trading provide growth in renewable capacity which supports a cleaner, more sustainable global energy system.

And while I’m sure Finnish coffee is fine; I’ll stick with tea.

PSC advantage

PSC’s HVDC experts have been involved in the conception, specification, construction, installation, commissioning, and operation support of over 40 HVDC projects globally. We also have a full-service Energy Markets service portfolio to deliver optimized solutions to utilities, market operators and vendors.

Find out more about PSC’s HVDC and Market Systems capabilities.

 

[1] http://www.worldstopexports.com/electricity-exports-country/

[2] 26.4 pounds per person per year. That’s why the Finn’s are number one on the coffee consumption list. https://www.universitymagazine.ca/countries-that-consume-the-most-coffee-2020/

[3] https://www.eia.gov/analysis/studies/electricity/hvdctransmission/pdf/transmission.pdf

[4] https://www.bbc.com/news/uk-politics-54421489

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