Electricity Trading in the American-Canadian Northeast: A Game Theoretic Analysis

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A multiregional electricity supply and trading model, derived from MARKAL and involving four regions, is used to assess the advantages derived from a cooperative planning of electricity generation in the American-Canadian Northeastern. The four regions (Québec, Ontario, New York, New England) must satisfy their respective electricity demands and capacity reserves over the 1990-2020 horizon. They can either use their own production or trade power with other regions. Each coalition of regions may develop additional interconnecting capacity over the chosen horizon, so as to increase electricity exchanges between them. The grand coalition of the four regions has the greatest synergy potential. We evaluate the cost savings realized by each coalition compared with the status quo. This permits us to define a cooperative game in characteristic function form. It is then proposed to use the cooperative game solution concept known as the Shapley value, to evaluate the share of the benefits which should go to each region if the electricity trading potential were to be fully developed in the Northeast.

, 20 pages