A Tracing Method for Pricing Inter-Area Electricity Trades

P. A. Kattuman, Richard John Green () and J. W. Bialek

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: In the context of liberalisation of electricity markets world wide, the need for agreed protocols for electricity trades between systems with different charges poses a special challenge. System operators need to know how much a given trade uses the network, in order to allocate an appropriate portion of their costs to that trade. This paper discusses a technique, tracing, for determining how much each of a number of trades uses different parts of the electricity network. The scheme is based on the assumption that at any network node, inflows are shared proportionally between outflows (and vice versa). The paper outlines the technique and shows how it could be applied to the problem of charging cross-border trades. The paper goes on to demonstrate that the technique has a game theoretic rationale, in that it produces the Shapley value solution to a game equivalent to this allocation problem.

Keywords: deregulation; transmission loss; pricing; co-operative games (search for similar items in EconPapers)
JEL-codes: L94 L51 C71 D63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-net and nep-reg
Date: 2001-06
Note: IO
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Persistent link: http://EconPapers.repec.org/RePEc:cam:camdae:0107

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