  In the Nordic countries (Sweden, Norway, Finland and Denmark), many
interconnectors are formed by long High-Voltage Direct-Current (HVDC) lines.
Every year, the operation of such interconnectors costs millions of Euros to
Transmission System Operators (TSOs) due to the high amount of losses that are
not considered while clearing the market. To counteract this problem, Nordic
TSOs (Svenska kraftn\"at - Sweden, Statnett - Norway, Fingrid - Finland,
Energinet - Denmark) have proposed to introduce linear HVDC loss factors in the
market clearing algorithm. The assessment of such a measure requires a detailed
model of the system under investigation. In this paper we develop and introduce
a detailed market model of the Nordic countries and we analyze the impact of
different loss factor formulations. We show that linear loss factors penalize
one HVDC line over the other, and this can jeopardize revenues of merchant HVDC
lines. In this regard, we propose piecewise-linear loss factors: a simple to
implement but highly effective solution. Moreover, we demonstrate how the
introduction of only HVDC loss factors is a partial solution, since it
disproportionately increases the AC losses. Our results show that the inclusion
of AC loss factors can eliminate this problem.
