We investigate the effects of system integration for reliability of supply in regional electricity systems along with cooperative measures to support it. Specifically, we set up a model to contrast the benefits from integration through statistical balancing (i.e., a positive externality) with the risk of cascading outages (a negative externality). The model is calibrated with a comprehensive dataset comprising 28 European countries on a high spatial and temporal resolution. We find that positive externalities from system integration prevail, and that cooperation is key to meet reliability targets efficiently. To enable efficient solutions in a non-marketed environment, we formulate the problem as a cooperative game and study different rules to allocate the positive and negative effects to individual countries. Strikingly, we find that without a mechanism, the integrated solution is unstable. In contrast, proper transfer payments can be found to make all countries better off in full integration, and the Nucleolus is identified as a particularly promising candidate. The rule could be used as a basis for compensation payments to support the successful integration and cooperation of electricity systems.
Electricity Reliability of supply Generation adequacy System integration Cooperative game