A Tracing Method for Pricing Inter-Area Electricity Trades
AbstractIn 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.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0107.
Date of creation: Jun 2001
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deregulation; transmission loss; pricing; co-operative games;
Find related papers by JEL classification:
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-06-22 (All new papers)
- NEP-ENE-2001-06-22 (Energy Economics)
- NEP-NET-2001-06-22 (Network Economics)
- NEP-REG-2001-06-22 (Regulation)
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