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

The Energy Journal, 2018, vol. 39, issue 6, 209-234

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.

Keywords: Cooperative game theory; Cost-benefit allocation; Transmission; expansion planning (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:39:y:2018:i:6:p:209-234

DOI: 10.5547/01956574.39.6.mkri

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