HVDC Competition Rules Could Cut Grid Costs

A new analysis from the Niskanen Center, a Washington, D.C.-based policy group, argues that high-voltage direct-current (HVDC) transmission could reduce system costs and improve grid reliability if federal rules and market designs allow those projects to compete on equal terms with more conventional options.

The paper says today’s regulatory and market frameworks were largely built around traditional power plants and related transmission upgrades, and that these structures do not consistently recognize the distinct services HVDC links can provide. As a result, the analysis calls for changes to procurement, compensation, and long-term planning so HVDC can be assessed fairly against other investments.

How the Niskanen Center frames HVDC’s value

HVDC technology is designed to move large blocks of electricity over long distances, and it operates differently from alternating-current lines. Supporters argue those operational characteristics can translate into broader reliability and resilience benefits for the overall system, especially when power must be transferred across wide regions.

According to the analysis, the problem is not only technical but institutional. It says planning and market structures tend to emphasize capacity and other attributes associated with conventional generation, which can leave merchant and cross-jurisdictional HVDC proposals at a disadvantage when projects are evaluated, selected, or assigned costs.

Structural barriers highlighted in planning and markets

The paper points to regional transmission planning and cost allocation practices that often assume the main economic benefits of transmission come from nearby generation or incremental upgrades. The Niskanen Center argues this can undercount the value of long-distance HVDC links that shift power flows across broader areas than many planning models are designed to reflect.

It also says market products and compensation mechanisms do not always credit the reliability or resilience contributions HVDC could deliver. In the paper’s view, these gaps can make HVDC appear less competitive on paper, even when it could meet reliability objectives or reduce costs under a more complete valuation approach.

Federal governance and the reform agenda in Washington

The analysis situates reform within a federal oversight landscape that includes multiple actors, naming Congress, the Department of Energy, and the Federal Energy Regulatory Commission among them. It presents the pathway forward as a combination of regulatory clarification and changes to market rules.

Among its recommendations are mechanisms to enable competitive procurement of transmission services and clearer approaches to crediting reliability and economic benefits that HVDC may provide. The paper also emphasizes that implementation details will matter, including how to design cost-sharing across regions, ensure interconnection and operational coordination, and align incentives for private investment without placing undue risk on ratepayers.

Why competitive access could change project outcomes

The central argument is that allowing HVDC to compete alongside traditional investments could give planners and customers more options and potentially reveal lower-cost ways to integrate renewable resources located far from demand centers. The analysis suggests that equal treatment in planning and markets could allow some HVDC projects to perform better on cost or reliability measures that current frameworks may not fully capture.

The paper concludes that upcoming regulatory dockets, agency guidance, and congressional activity will be key indicators of whether its recommendations gain traction. It also notes that if federal and regional institutions open competition, some developers say HVDC could take a larger role in linking renewable-rich regions with demand centers at lower system cost.