Coordinating cross-border electricity interconnection investments and trade in market coupled regions. (January 2019)

• Record Type: Journal Article
• Authors: Loureiro, Manuel V.; Claro, João; Fischbeck, Paul
• Is Part Of: International journal of electrical power & energy systems. Volume 104(2019)
• Page Start: 194
• Page End: 204
• Publication Date: 2019-01
• Subjects: Transmission expansion planning -- Interconnections -- Cross-border cost allocation -- Nash-Coase bargaining -- Nash bargaining -- Market coupling; Electrical engineering -- Periodicals; Electric power systems -- Periodicals; Électrotechnique -- Périodiques; Réseaux électriques (Énergie) -- Périodiques; Electric power systems; Electrical engineering; Periodicals; 621.3
• DOI: 10.1016/j.ijepes.2018.07.003
• Languages: English
• ISSNs: 0142-0615

Abstract

Highlights: We propose an interconnection investment model for two market coupled regions. Fair share cost allocation solutions allow and forbid compensations. Solutions use respectively Nash-Coase bargaining and Nash bargaining. We illustrate optimal cost allocation policies with a study of the Iberian market. Results suggest the ability to estimate realistic interconnection capacity needs. Abstract: Investments in cross-border electricity interconnections are key for the integration of the European energy market. To analyze policy frameworks for these decisions, we model two settings for the expansion of transmission capacity between two regions, where the volume of investment is agreed upon through either Nash-Coase or Nash bargaining. For each setting we provide fair share cost allocation solutions, respectively with and without compensations. Each region has its own TSO, maximizing social welfare within its geography, and the markets are modeled with linear supply and demand curves, with trade enabled by the interconnection. The results of the application of the models to the Iberian market suggest their ability to estimate realistic values for the capacity of cross-border interconnection between two regions.