Is total system cost minimization fair to all the actors of an energy system? Not according to game theory

Game theory-based analysis of policy instrument consequences on energy system actors in a Nordic municipality

“…A previous paper by the present Authors [ 53 ] was focused on showing the difference between a traditional “total system cost” approach and a game theory approach in determining the optimal strategies of a supplier and a group of consumers in order to reach a given environmental target on the reduction of CO2 emissions. It was concluded that a game theory approach is more suitable to identify the circumstances influencing the strategies chosen by the actors, realistically considers their interactions and is able to fairly harmonize their economic interests.…”

“…The novelty of this paper is represented by a game theory approach, applied to the same problem setting of [ 53 ], that is used to investigate the effect of different policy instruments on the optimal strategies chosen by the actors and, in turn, on the resulting CO2 emissions without imposing a constraint on the level of their reduction. This approach makes it possible to discard another less than realistic element in energy system modelling and optimization.…”

“…To make the research gap and the novelty of this paper clearer, a comparison of the main features of the approaches followed by the literature mentioned in the previous section, by paper [ 53 ] and by the present paper is offered in Table 1 .…”

“… Technology constraints. [ 53 ] ESM MOEA + GT Municipality. Electricity sector and parts of the heating sector.…”

Game theoretic optimisation in process and energy systems engineering: A review

“…At a first stage the problem is transformed in a single level MINLP using KKT conditions at the original problem, the use of Big M constraints along with auxiliary variables, results in the final MILP form of the problem. The fair investment portfolio in the energy system of town in Sweden has been examined by Fischer and Toffolo (2022). The authors juxtapose the results of a total cost minimisation objective against a Nash bargaining profit allocation among agents of the energy market and they highlight that the different games result in varying investment portfolios in terms of technology selected.…”