Flow tracing and nodal cost allocation in renewable energy networks


For a cost efficient design of a future renewable European electricity system, the placement of renewable
generation capacity will seek to exploit locations with good resource quality, that is for instance onshore
wind in countries bordering the North Sea and solar PV in South European countries. Regions with less
favorable renewable generation conditions benefit from this remote capacity by importing the respective
electricity as power flows through the transmission grid. The resulting intricate pattern of imports and
exports represents a challenge for the analysis of system costs on the level of individual countries. Using
flow tracing techniques, we introduce flow-based nodal levelized costs of electricity (LCOE) which allow to
incorporate capital and operational costs associated with the usage of generation capacity located
outside the respective country under consideration. This concept and a complementary allocation of
transmission infrastructure costs is applied to a simplified model of an interconnected highly renewable
European electricity system. We observe that cooperation between the European countries in a heterogeneous
system layout does not only reduce the system-wide LCOE, but also the flow-based nodal
LCOEs for every country individually.

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