Game theory application for determining wheeling charges

Abstract

The emergence of open trading in electrical markets has led to the unbundling of services traditionally supplied by integrated electricity utilities (generation, transmission and distribution). Transmission open access regulations establish that all the electrical market participants have the same rights to use the transmission facilities in the same conditions and only subject to operational restrictions (security levels, congestion, etc.). On the other hand, the transmission network users are responsible for the costs incurred for the wheeler in order to accommodate the transactions. However, how to charge the users for the transmission facilities in a fair way is still a problem to be properly resolved. A concomitant problem is how to define the fairness criteria to charge the users for these facilities. To deal with this problem, methodologies involving the application of game theory are studied. In competitive electricity markets, the participants need assistance on how to make decisions and with whom to form coalitions to optimise their costs. In this paper, two solution concepts of the cooperative game theory are introduced: the nucleolus and the Shapley value.