Increase in offshore wind and solar farms drive European smart grid advanced components market

LONDON, UK: The world is in urgent need of a complete modern power grid to meet the growing requirements for a reliable, secure, cost effective and environmentally responsible power solution.

With green issues such as climate change and carbon emissions gaining prominence everyday, there is a greater emphasis on power generation from renewable sources. High voltage direct current (HVDC) is the only viable technology for offshore wind farms, as electric power transmitted through underwater cables is not possible with alternating current (AC).

HVDC has potential benefits for the emerging super grid, as it can mitigate the effects of intermittency by averaging the outputs of wind and solar farms.

New analysis from Frost & Sullivan, European Smart Grid Market - Advanced Component, finds that the HVDC market earned revenues of 550 million euro in 2008 and estimates this to reach 973.7 million euro in 2015. Project cost estimates are inclusive of cable, cable installation, converter, station construction, management and technical support, risk insurance.

"Harmonisation of electrical grids is a major step in complete grid automation," says Frost & Sullivan Senior Research Analyst Vikas Ravindran. "The rise in offshore wind and solar farms has resulted in the logical move of opting for HVDC for electrical power transmission, which is set to become the norm."

HVDC is the only viable technology for offshore wind farms as electric power is transmitted through underwater cables which is not possible with AC. HVDC has potential benefits for the emerging super grid as they can mitigate the effects of intermittency by averaging the outputs of wind and solar farms.

HVDC technology has been in use for more than three decades, and is primarily used for bulk power transmission. When used for long-distance power transmission, HVDC has been less expensive and has lower electrical losses compared to AC. The European electricity market is moving towards homogeneity of its electricity networks with the announcement of 28 projects, out of which sixteen are complete.

However, problems such as high cost of technology and the inability to be used for shorter distances are retarding the growth of HVDC. Government intervention plays a major role in determining the success of a HVDC project concerning smooth electricity trade off between any two regions.

"Although the lower line construction cost is an advantage, the high costs of the components continue to be a major hurdle," explains Vikas. "If the cost of the systems is brought down significantly, the demand can be expected to increase."

The total cost advantage can be realised only when the cost of technologies used is at par with the existing AC systems. Retrofit projects are another alternative, which major market participants should capitalise on, as most of the existing HVDC systems are more than two decades old.

"Overhauling is the next big opportunity for market participants and work is already on to replace the existing systems," concludes Vikas. "Recently, there has been a renewed interest in projects that were decommissioned earlier due to lack of funding or inappropriate technology."