Groupe d’études et de recherche en analyse des décisions

Facilitating power markets integration: A cooperative game with externalities approach

Sébastien Debia HEC Montréal, Canada

Sébastien Debia

Regional integration can significantly reduce the cost of power system decarbonization. The different regions must however first reach an agreement on how to share the gains from integration. Network expansion entails network externalities that impede the negotiation process. I use the framework of cooperative game with externalities to analyze the outcomes of new interconnections in the US-Canada Northeast region. The allocation of the congestion rent is both problematic and critical for reaching an agreement. Integrating local capacity mechanisms to take into account power flow on interconnection greatly helps to resolve that issue.