Future HVDC Cable Supply and Demand as a Potential Threat to the EU Energy Transition

Abstract

This paper analyzes the factors that influence the manufacturing costs of high-voltage-direct-

current (HVDC) cables in the EU, projects price developments through the year 2050, and

provides potential measures to stabilize cable production costs. HVDC cables play an important

role in the energy transition, because the economic operation of an increasingly decentralized

power grid due to renewable energies requires technology with low transmission losses. The

paper further identifies the contribution of each cost component and forecasts future values

under various scenarios. Since the EU lists copper as a strategic raw material, a partial

equilibrium model is employed to reduce uncertainty in price estimates for this commodity, the

availability of which is critical for the manufacturing of HVDC cables. In a sensitivity analysis,

the contribution of each input variable to our cable cost model is assessed. The results suggest

that copper demand due to HVDC cable manufacturing exerts a negligible effect on EU copper

prices, although cost trends diverge significantly across relevant Shared Socioeconomic

Pathway scenarios. The paper concludes that cable costs are tied to the affordability of copper.

Metal availability and regulatory framework impact the timely development of the HVDC

connections that will be necessary for the energy transition in Europe.

Keywords: HVDC cable, HVDC costs, partial equilibrium model, copper supply, European Green Deal

JEL Classification: Q41, Q31, Q55, D58, O13