Navigant Research Blog

High-Voltage Transmission System Landscape Undergoes Dramatic Change

— June 24, 2014

The high-voltage transmission system (HVTS) landscape can only be described as vast and evolving, as the forces of modernization, urbanization, and industrial expansion are transforming the power grids in Asia Pacific, Middle East, Africa, and Latin America.  In my forthcoming report, High-Voltage Transmission Systems, I explain why each of these regions represents a tremendous opportunity for the seven major HVTS technologies and why the market is expected to grow strongly.  These HVTS technologies include:

  • High-voltage direct current (HVDC) systems
  • High-voltage alternating current (HVAC) systems
  • Submarine and superconducting cables
  • Flexible AC transmission system (FACTS) solutions
  • Asset management and condition monitoring (AMCM) systems
  • Supervisory control and data acquisition (SCADA) systems
  • Substation automation (SA) systems

Both Europe and North America are clearly more mature markets.  Aging infrastructure and the adoption of utility-scale wind and solar generation will drive the reconfiguration of the HVTS network in those regions, likely creating many new opportunities.

Tectonic Shifts

The increasing investment from the private sector is exemplified by Berkshire Hathaway’s rebranding of MidAmerican Energy Holding Co. as Berkshire Hathaway Energy.  The Electricity Transmission Texas (ETT) partnership, which combines Berkshire Hathaway Energy and transmission system operator American Electric Power, demonstrates the foresight needed to invest in these large-scale infrastructure projects and points to financial markets seeing long-term opportunity in the next generation of the HVTS network.

The HVTS market has a history of epic mergers, such as Alstom and Schneider Electric acquiring parts of Areva and General Electric’s (GE’s) takeover of Alstom, that point to a shifting landscape of HVTS players.   From a technological standpoint, we are seeing the beginning of a new era where the Internet of Things (IoT) hits the HVTS market full force with inexpensive, easy-to-install wireless and remote sensors and cloud-based computing resources that use complex analytics and machine-learning algorithms to manage all aspects of the HVTS.  Indeed, the HVTS roadmap will be an interesting and profitable journey over the next decade and beyond.


With Alstom Bid, GE Steps Up T&D Competition

— April 30, 2014

The news that General Electric’s (GE’s) $13 billion bid to acquire Alstom SA has been accepted by Alstom’s board – coupled with Siemens AG’s announcement that they are considering a counterbid  – represents a clash of titans in the global marketplace for electricity generation and transmission and distribution (T&D).  For the last decade, that market has been led by three companies: ABB, Alstom, and Siemens.  GE, a huge global corporation with multiple business lines across finance, healthcare, and electric T&D, has focused its T&D business primarily on generation, digital energy software solutions, and some high-voltage system components, such as series compensation (SC) devices used to correct voltage loss and other instabilities on the electric transmission grid.

In 2012, GE announced a joint venture partnership and equity position in XD Group, a Chinese heavy industrial manufacturer that sells a full range of T&D equipment, substations, transformers, and high-voltage direct current (HVDC) transmission lines.  The deal not only opened up the booming Chinese T&D market to GE, but also allowed the company to white-label XD’s T&D system equipment for resale in other regions.  In my discussions with the Big 3 (ABB, Alstom, and Siemens) vendors at the recent Institute of Electrical and Electronics Engineers (IEEE) T&D systems trade show in Chicago, they mentioned that GE has become a significant competitor, signaling that the market structure has now morphed into a Big 4.

Mind the Gaps

However, I also saw that there are significant gaps in GE’s technical product lines and global manufacturing and installation capabilities, which need to be filled.  For example, flexible alternating current transmission systems (FACTS) solutions for voltage drop and power quality on transmission lines represent a $4 billion dollar market that continues to grow annually.  GE has traditionally provided SC solutions, but not the faster-responding static VAR compensator (SVC) and static synchronous compensator (STATCOM) solutions that are now being adopted as the aging transmission grid is being upgraded.  The Alstom acquisition is the perfect solution for filling that gap, as Alstom SA has manufacturing, design, and installation capabilities for SVCs and STATCOMs in North America, Europe, and Asia Pacific.  A broader discussion of this market and the FACTS technologies can be found in Navigant Research’s recent report, Flexible AC Transmission Systems.

At the time of this writing, it appears that the GE offer will be approved by the French government, and that Siemens is preparing a counteroffer.  ABB’s CEO has stated that his company will not enter this fray, but I am certain that ABB’s internal analysts are running the numbers and assessing the opportunity.  In this ongoing clash, the Big 4 all have a long-standing history of growth through acquisition.   However this works out, we can expect the market to sooner or later be whittled down to the Big 3 again.  These developments will definitely add color to my upcoming report on high-voltage transmission systems, which will be released later in 2Q.  Stay tuned.


The FACTS about Distributed Wind and Renewable Generation

— March 4, 2014

Since the mid-1990s, during my annual pilgrimage to DistribuTECH, I’ve always picked up a new emerging trend or a newly released technology.  This year’s show in San Antonio, Texas was no different.  I went to Texas to learn more about flexible AC transmission system (FACTS) technologies and had the opportunity to talk to many of the major vendors and some interesting new companies.  My focus started with traditional FACTS technologies (i.e., series compensation [SCs], static VAR compensators [SVCs], and static synchronous compensators [STATCOMs]).  These are almost always complex engineered systems designed to correct voltage drops in long-distance, high-voltage AC lines to perform power factor correction in areas where generation stations have been retired.

Smaller-scale SVC and STATCOM technologies were typically used to correct voltage sag, power factor, and flicker at large industrial sites such as steel mills, large-scale mining, crushers, pumps, and other inductive loads.  At DistribuTECH, vendors like S&C Electric, ABB, and AMSC talked about the use of D-SVCs and D-STATCOMs to stabilize the megawatts produced by distributed renewable sources on the edge of the grid.  These new, downsized versions of transmission grid-scale SVC and STATCOM technologies are now being modularized in familiar 8’ x 40’ containers that can be delivered quickly for any application, sometimes coupled with modular battery storage, to smooth out the intermittency of distributed renewables.

Small and Scattered

This move to smaller-scale distributed FACTS solutions has other implications as well: they can be added quickly to both transmission and distribution substations, with minimal space requirements. They can also be deployed near the edge of the grid at distribution substations or even on local feeders where renewables and electric vehicle charging installations are stressing the local grid in ways that were not imagined when the distribution grid was originally installed.  Startup companies like Varentec Inc. are now introducing pole-mounted mini-FACTS systems.  These systems are wired into the transformer with wireless communications, enabling edge-of-grid corrections in near real-time, far beyond the local centrally controlled substation.

When I started my latest research on FACTS technologies, I imagined that they would be limited to the big iron at thousands of high-voltage transmission system substations where SC, SVC, and STATCOM technologies have been traditionally used.  It was eye-opening to see the emergence of FACTS technologies deployed on the distribution-level grid, where they are opening significant new markets for both traditional and emerging FACTS vendors.  Transmission system designs and technologies are covered in detail in Navigant Research’s report, High-Voltage Direct Current Transmission Systems.  In addition, recent Navigant Research reports, such as Emerging Wind Markets Assessment and Distributed Solar Energy Generation, cover the rapid adoption of distributed renewables in all regions of the world.  Over the next year, our Smart Utilities team will release a series of in-depth reports on the high-voltage transmission grid, starting with my upcoming report, Flexible AC Transmission Systems, which is expected to be released in 2Q 2014.


High-Voltage DC Unlocks Distant Offshore Wind Sites

— February 24, 2014

Germany is on track to commission close to 1 GW of offshore wind in 2014 and will follow up with another 3 GW between 2015 and 2016.  Goals have been revised downward recently, but the government still aims to bring 6.5 GW by 2020 and 15 GW by 2030.  These ambitious installation levels are driven by strong government-backed renewables goals and supportive incentives, but also by a novel solution to the challenge that most of Germany’s ideal offshore wind sites are very far from shore – most over 75 km.  At these distances, losses are so great over typical high-voltage alternating current (AC) subsea transmission cables that they can negate the construction of a wind plant.

The solution – a first in the offshore wind market – is the construction of a network of oversized high-voltage direct current (HVDC) converter stations and connecting cables that will allow much of Germany’s pipeline of offshore wind plants to efficiently deliver power to the mainland.  Direct current (DC) is neither new nor novel.  Its use fell out of favor many decades ago as AC power was cemented as the market standard.  But growing need for electricity and the increasing distances required for some generation projects has sparked a rebirth.  These factors have also sparked fierce innovation and competition among power giants such as ABB with its HVDC Light, Siemens’ HVDC Plus, and Alstom Grid’s MaxSine, each using advanced voltage source converter (VSC) technology.  Likewise, a relatively small number of companies provide large HVDC cables for subsea use, resulting in shortages and order backlogs.  This is prompting new entrants into the market and advances in cable technology, such as crosslinked polyethylene (XLPE) HVDC cable.

Towering Turbines

Offshore wind is a leading driver of the HVDC renaissance, and the scale of the effort is impressive.  The larger units look like offshore oil rigs, topping 93 meters in height and weighing upwards of 9,300 metric tons (not including foundation).  In the first German stages, the HVDC buildout is composed of four grid clusters in the North Sea known as SylWin, HelWin, BorWin, and DolWin. These initial phases combined provide around 5.9 GW of capacity and utilize around 800 km of undersea HVDC cable.  Multiple wind farms connect to the converter clusters in order to share and reduce the overall cost to build the HVDC network.

Germany is not alone.  The United Kingdom is also making enormous progress deploying offshore wind farms and will rely on HVDC for many new wind plants.  The first wind plants under the United Kingdom’s Round 3 offshore wind development are entering construction in 2014 at distances from shore that range from 30 km to 185 km. Close to 20 GW are located beyond 100 km and will rely on HVDC.  By 2020, as much as 30 GW of offshore wind will likely be connected by HVDC globally.  Corresponding HVDC export cable route lengths are expected to reach roughly 4,000 km.

The downside to HVDC is its high cost, driven by the large converter stations.  The challenge to the offshore wind industry, the hardware providers, and grid integrators is to bring costs down by standardizing hardware and voltages and by finding efficiencies of scale in converter component manufacturing and offshore construction.

More detailed information and analysis of the HVDC technology, deployments, cable providers, transmission integrators, and the pipeline of wind plants and their developers connecting to the systems are available through the following Navigant Research reports:  International Wind Energy Development: Offshore Report 2013, High Voltage Direct Current Transmission Systems, and Submarine Electricity Transmission.


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