Investment decisions for bulk power transmission schemes in liberalised markets

Project financing based on private initiative becomes important even in the regulated electricity sector of many countries. Whereas in former times the laws were directed to safe, reliable and macro economic power supply, the aims under deregulated market conditions are micro-economic and competitive. This report deals with the micro economics of an investment focusing on the three outputs payback period and payoff time, return on equity before tax and transmission costs. It allows a quick scan of the financial feasibility of a project. A simplified model is taken to prove whether the investment is attractive to investors and lenders, how long it takes to pay the loans back and which minimum transfer charge must be taken from the market in order to run the operator company successfully. The model is demonstrated by taking a power transmission scheme in HVDC technology. Figures taken from the practise allow an insight in the "secrets of profitability of a transmission scheme". Varying the model shows when and if it is justified by economic reasons to invest in series capacitors in order to increase the transmission capacity of the AC overhead line.