IDEAS home Printed from https://ideas.repec.org/p/ris/ewikln/2017_013.html
   My bibliography  Save this paper

Reliable Electricity: The Effects of System Integration and Cooperative Measures to Make it Work

Author

Listed:
  • Hagspiel, Simeon

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

Abstract

We investigate the effects of system integration for reliability of supply in regional electricity systems along with cooperative measures to support it. Specifically, we set up a model to contrast the benefits from integration through statistical balancing (i.e., a positive externality) with the risk of cascading outages (a negative externality). The model is calibrated with a comprehensive dataset comprising 28 European countries on a high spatial and temporal resolution. We find that positive externalities from system integration prevail, and that cooperation is key to meet reliability targets efficiently. To enable efficient solutions in a non-marketed environment, we formulate the problem as a cooperative game and study different rules to allocate the positive and negative effects to individual countries. Strikingly, we find that without a mechanism, the integrated solution is unstable. In contrast, proper transfer payments can be found to make all countries better off in full integration, and the Nucleolus is identified as a particularly promising candidate. The rule could be used as a basis for compensation payments to support the successful integration and cooperation of electricity systems.

Suggested Citation

  • Hagspiel, Simeon, 2017. "Reliable Electricity: The Effects of System Integration and Cooperative Measures to Make it Work," EWI Working Papers 2017-13, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    • Handle: RePEc:ris:ewikln:2017_013
    as

    Download full text from publisher

    File URL: https://www.ewi.uni-koeln.de/cms/wp-content/uploads/2017/12/EWI_WP_17-13_Reliable_Electricity_The_Effects_of_System_Integration.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Severin Borenstein & James. Bushnell & Steven Stoft, 2000. "The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 294-325, Summer.
    2. Leahy, Eimear & Tol, Richard S.J., 2011. "An estimate of the value of lost load for Ireland," Energy Policy, Elsevier, vol. 39(3), pages 1514-1520, March.
    3. Bezalel Peleg & Peter Sudhölter, 2007. "Introduction to the Theory of Cooperative Games," Theory and Decision Library C, Springer, edition 0, number 978-3-540-72945-7, March.
    4. Hendrik Bessembinder & Michael L. Lemmon, 2006. "Gains from Trade under Uncertainty: The Case of Electric Power Markets," The Journal of Business, University of Chicago Press, vol. 79(4), pages 1755-1782, July.
    5. Lijesen, Mark G., 2007. "The real-time price elasticity of electricity," Energy Economics, Elsevier, vol. 29(2), pages 249-258, March.
    6. Joskow, Paul L., 2008. "Capacity payments in imperfect electricity markets: Need and design," Utilities Policy, Elsevier, vol. 16(3), pages 159-170, September.
    7. de Nooij, Michiel & Koopmans, Carl & Bijvoet, Carlijn, 2007. "The value of supply security: The costs of power interruptions: Economic input for damage reduction and investment in networks," Energy Economics, Elsevier, vol. 29(2), pages 277-295, March.
    8. M. Cepeda & M. Saguan & D. Finon & V. Pignon, 2009. "Generation adequacy and transmission interconnection in regional electricity markets," Post-Print hal-00716344, HAL.
    9. David Newbery and Michael Grubb, 2015. "Security of Supply, the Role of Interconnectors and Option Values : insights from the GB Capacity Auction," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    10. Serra, Pablo & Fierro, Gabriel, 1997. "Outage costs in Chilean industry," Energy Economics, Elsevier, vol. 19(4), pages 417-434, October.
    11. Reichl, Johannes & Schmidthaler, Michael & Schneider, Friedrich, 2013. "The value of supply security: The costs of power outages to Austrian households, firms and the public sector," Energy Economics, Elsevier, vol. 36(C), pages 256-261.
    12. Michael L. Telson, 1975. "The Economies of Alternative Levels of Reliability for Electric Power Generation Systems," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 679-694, Autumn.
    13. Peter Cramton & Axel Ockenfels & Steven Stoft, 2013. "Capacity Market Fundamentals," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    14. Cepeda, Mauricio & Saguan, Marcelo & Finon, Dominique & Pignon, Virginie, 2009. "Generation adequacy and transmission interconnection in regional electricity markets," Energy Policy, Elsevier, vol. 37(12), pages 5612-5622, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peter, Jakob & Wagner, Johannes, 2018. "Optimal Allocation of Variable Renewable Energy Considering Contributions to Security of Supply," EWI Working Papers 2018-2, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter, Jakob & Wagner, Johannes, 2018. "Optimal Allocation of Variable Renewable Energy Considering Contributions to Security of Supply," EWI Working Papers 2018-2, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    2. Hagspiel, Simeon & Knaut, Andreas & Peter, Jakob, 2017. "Reliability in Multy-Regional Power Systems - Capacity Adequacy and the Role of Interconnectors," EWI Working Papers 2017-7, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 29 Jun 2018.
    3. Wolf, André & Wenzel, Lars, 2016. "Regional diversity in the costs of electricity outages: Results for German counties," Utilities Policy, Elsevier, vol. 43(PB), pages 195-205.
    4. Wolf, André & Wenzel, Lars, 2015. "Welfare implications of power rationing: An application to Germany," Energy, Elsevier, vol. 84(C), pages 53-62.
    5. David P. Brown & Derek E. H. Olmstead, 2017. "Measuring market power and the efficiency of Alberta's restructured electricity market: An energy-only market design," Canadian Journal of Economics, Canadian Economics Association, vol. 50(3), pages 838-870, August.
    6. Kim, Kayoung & Cho, Youngsang, 2017. "Estimation of power outage costs in the industrial sector of South Korea," Energy Policy, Elsevier, vol. 101(C), pages 236-245.
    7. Röpke, Luise, 2013. "The development of renewable energies and supply security: A trade-off analysis," Energy Policy, Elsevier, vol. 61(C), pages 1011-1021.
    8. Abrate, Graziano & Bruno, Clementina & Erbetta, Fabrizio & Fraquelli, Giovanni & Lorite-Espejo, Azahara, 2016. "A choice experiment on the willingness of households to accept power outages," Utilities Policy, Elsevier, vol. 43(PB), pages 151-164.
    9. Ochoa, Camila & van Ackere, Ann, 2015. "Winners and losers of market coupling," Energy, Elsevier, vol. 80(C), pages 522-534.
    10. Bajo-Buenestado, Raúl, 2017. "Welfare implications of capacity payments in a price-capped electricity sector: A case study of the Texas market (ERCOT)," Energy Economics, Elsevier, vol. 64(C), pages 272-285.
    11. Newbery, David, 2016. "Missing money and missing markets: Reliability, capacity auctions and interconnectors," Energy Policy, Elsevier, vol. 94(C), pages 401-410.
    12. Christian Growitsch & Raimund Malischek & Sebastian Nick & Heike Wetzel, 2015. "The Costs of Power Interruptions in Germany: A Regional and Sectoral Analysis," German Economic Review, Verein für Socialpolitik, vol. 16(3), pages 307-323, August.
    13. Landegren, Finn & Johansson, Jonas & Samuelsson, Olof, 2019. "Quality of supply regulations versus societal priorities regarding electricity outage consequences: Case study in a Swedish context," International Journal of Critical Infrastructure Protection, Elsevier, vol. 26(C).
    14. Bhagwat, Pradyumna C. & Marcheselli, Anna & Richstein, Jörn C. & Chappin, Emile J.L. & De Vries, Laurens J., 2017. "An analysis of a forward capacity market with long-term contracts," Energy Policy, Elsevier, vol. 111(C), pages 255-267.
    15. Luise Röpke, 2015. "Essays on the Integration of New Energy Sources into Existing Energy Systems," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 58.
    16. Musiliu 0. Oseni & Michael G. Pollitt, 2013. "The Economic Costs of Unsupplied Electricty: Evidence from Backup Generation among African Firms," Cambridge Working Papers in Economics 1351, Faculty of Economics, University of Cambridge.
    17. Botelho, Vinícius, 2019. "Estimating the economic impacts of power supply interruptions," Energy Economics, Elsevier, vol. 80(C), pages 983-994.
    18. David Newbery and Michael Grubb, 2015. "Security of Supply, the Role of Interconnectors and Option Values : insights from the GB Capacity Auction," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    19. Zappa, William & Junginger, Martin & van den Broek, Machteld, 2021. "Can liberalised electricity markets support decarbonised portfolios in line with the Paris Agreement? A case study of Central Western Europe," Energy Policy, Elsevier, vol. 149(C).
    20. Morrissey, Karyn & Plater, Andrew & Dean, Mary, 2018. "The cost of electric power outages in the residential sector: A willingness to pay approach," Applied Energy, Elsevier, vol. 212(C), pages 141-150.

    More about this item

    Keywords

    Electricity; Reliability of Supply; Generation Adequacy; System Integration; Cooperative Game;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:ewikln:2017_013. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sabine Williams (email available below). General contact details of provider: https://edirc.repec.org/data/ewikode.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.