On the Viability of Energy Communities

Abstract

Following the development of decentralized production technologies, energy communities have become a topic of increased interest. While the potential benefits have been described, we use the framework of cooperative game theory to test the ability of such communities to adequately share the gains. Indeed, despite the potential value created by such coalitions, there is no guarantee that they will be viable: a subset of participants may find it profitable to exit the community and create another one of their own. We take the case of a neighborhood, having access to a limited resource e.g. a shared roof or piece of land which they can exploit if they invest in some renewable production capacity. By joining the community, participants also enjoy aggregation gains in the form of reduced network fees. We find conditions depending on the structure of renewable installation costs, on the magnitude of the aggregation effect and coordination costs and, most importantly, on the chosen sharing rule, under which the whole energy community is stable. Efficiency could require the intervention of a social planner or a change in network tariff structures.

Optimal sizing of energy communities with fair revenue sharing and exit clauses: Value, role and business model of aggregators and users

“…Rationality guarantees that no subset of users benefit from leaving the community, while efficiency specifies that all benefits given by the aggregate shall be completely distributed among all components of the aggregate. All solutions that are efficient and rational belong to the "Core", which is a key concept in game theory [1,2]. The Core definition is embedded in the Nucleolus concept adopted in [18] for the coordination of multiple microgrids in a distribution system: rationality and efficiency properties are satisfied, but concerns about fairness arise because the approach mainly focuses on strengthening the stability of the coalition.…”

“…In order to determine the best possible sizing of the system, the aggregator solves a mathematical optimization problem succinctly, described in (1).…”

“…The proposed Shapley/Core method is also compared with the MinVar reward distribution discussed in [1], where profits are distributed with the objective of minimizing the uneven treatment of users, while guaranteeing the solution to belong to the Core. The corresponding mathematical formulation is denoted in (12), where the objective function is the minimization of the variance of the benefit distribution, whereas the constraints are as in the Shapley/Core case (11).…”

“…The main advantage of this formulation is that it does not involve the calculation of the Shapley function, thus (possibly with the help of decomposition techniques) the entire technical and reward distribution problems solution may be faster to compute [1,32]. On the other hand, while belonging to the Core the final distribution may privilege users only because their absolute NPV value may be larger than others, whose fairness properties may be questionable.…”

The promotion of community energy projects in Chile and Scotland: An economic approach using biform games

“…In relation to the economic-strategic viability of projects, Abada et al [47] analyse an energy community, understood as an initiative where several households in a given building decide to use a single meter and potentially cooperate and install solar photovoltaics (PV) panels. They point out that there is no assurance that coalitions of households will be viable and that this is affected by the installation costs, coordination costs, and sharing rules.…”