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Fair division of costs in green energy markets

Author

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  • Hougaard, Jens Leth
  • Kronborg, Dorte
  • Smilgins, Aleksandrs

Abstract

This paper considers cost allocation in networks where agents are characterized by stochastic demand and supply of a non-storable good, e.g. green energy. The grid itself creates possibilities of exchanging energy between agents and we propose to allocate common costs in proportion to the economic gain of being part of the grid. Our model includes a set of fundamental requirements for the associated trading platform. In particular, it is argued that a suitable mechanism deviates from a traditional market. The approach is illustrated by simulations.

Suggested Citation

  • Hougaard, Jens Leth & Kronborg, Dorte & Smilgins, Aleksandrs, 2017. "Fair division of costs in green energy markets," Energy, Elsevier, vol. 139(C), pages 220-230.
    • Handle: RePEc:eee:energy:v:139:y:2017:i:c:p:220-230
    DOI: 10.1016/j.energy.2017.06.122
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    References listed on IDEAS

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    Cited by:

    1. Kung, Chih-Chun & Lan, Xiaolong & Yang, Yunxia & Kung, Shan-Shan & Chang, Meng-Shiuh, 2022. "Effects of green bonds on Taiwan's bioenergy development," Energy, Elsevier, vol. 238(PA).

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    More about this item

    Keywords

    Cost allocation; Networks; Gains; Electricity; Smart grids;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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