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A Mechanism for Allocating Benefits and Costs from Transmission Interconnections under Cooperation: A Case Study of the North Sea Offshore Grid

Martin Kristiansen, Francisco D. Muñoz, Shmuel Oren, and Magnus Korpås

Year: 2018
Volume: Volume 39
Number: Number 6
DOI: 10.5547/01956574.39.6.mkri
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Abstract:
We propose a generic mechanism for allocating the benefits and costs that result from the development of international transmission interconnections under a cooperative agreement. The mechanism is based on a planning model that considers generation investments as a response to transmission developments, and the Shapley Value from cooperative game theory. This method provides a unique allocation of benefits and costs considering each country's average incremental contribution to the cooperative agreement. The allocation satisfies an axiomatic definition of fairness. We demonstrate our results for three planned transmission interconnections in the North Sea and show that the proposed mechanism can be used as a basis for defining a set of Power Purchase Agreements among countries. This achieves the desired final distribution of economic benefits and costs from transmission interconnections as countries trade power over time. We also show that, in this case, the proposed allocation is stable.



On the Viability of Energy Communities

Ibrahim Abada, Andreas Ehrenmann, and Xavier Lambin

Year: 2020
Volume: Volume 41
Number: Number 1
DOI: 10.5547/01956574.41.1.iaba
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Abstract:
Following the development of decentralized production technologies, energy communities have become a topic of increased interest. While the potential benefits have been described, we use the framework of cooperative game theory to test the ability of such communities to adequately share the gains. Indeed, despite the potential value created by such coalitions, there is no guarantee that they will be viable: a subset of participants may find it profitable to exit the community and create another one of their own. We take the case of a neighborhood, having access to a limited resource - e.g. a shared roof or piece of land - which they can exploit if they invest in some renewable production capacity. By joining the community, participants also enjoy aggregation gains in the form of reduced network fees. We find conditions depending on the structure of renewable installation costs, on the magnitude of the aggregation effect and coordination costs and, most importantly, on the chosen sharing rule, under which the whole energy community is stable. In particular, we show that standard sharing rules often fail to enable communities to form and we suggest the adoption of slightly more sophisticated rules. Efficiency could require the intervention of a local planner or a change in network tariff structures.





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