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

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.

Towards a fully integrated North Sea offshore grid: An engineering‐economic assessment of a power link island

“…One example being the distribution of costs and benefits due to asymmetric implications of multinational projects. That is, some countries might gain more benefits than others, as illustrated for the NSOG in Egerer et al ()) and Kristiansen, Munoz, et al ().…”

“…Grid expansion is known to yield considerable, material price impact in adjacent price areas (Hogan, ), consequently affecting the market landscape in which generators operates their units and plans long‐term capacity expansion (Alayo, Rider, & Contreras, ) . Repercussions might also arise in surrounding, third‐party areas which are not directly connected (Kristiansen, Munoz, et al, ) with the transmission projects. Hence, the geographical span of the case study depicted in Figure represents some limitations as the interdependencies with surrounding countries might impact the resulting benefits of a PLI.…”

“…Results are obtained by designing a set of case studies that are analyzed using an expansion planning model. The model is well documented, for example, in Kristiansen, Munoz, Oren, and Korpås () and Kristiansen, Korpås, and Svendsen (), so readers who are interested in the model formulation can refer to these. The following subsections discuss our approach to this study in greater detail.…”

A market-based approach for enabling inter-area reserve exchange

“…Let A denote the set of areas. Similar to [1,21] and many others, in our framework, area as a whole (country or region) is an ensemble of consumers and generators pertaining to that area and operator (and the transmission owners). This definition ensures the institutional relevance of the overall problem.…”

Income Distribution of Forest Rights Transfer Cooperation Based on Game Theory: A Case of China

“…Scholars have used the Shapley value method to solve the distribution of gas emissions reduction through cooperation of neighboring areas (Xie et al 2016;Luqman et al 2018); distribution of costs and benefits from international transmission interconnections under a cooperative agreement (Kristiansen et al 2018); and revenue distribution in the cooperation among farmers sharing complementary resources (Gerichhausen et al 2009). Based on the previous research, the Shapley value method is adopted as the basis for the income distribution by using the principle of the cooperative game.…”