Sharing quotas of a renewable energy hedge pool: A cooperative game theory approach

Renewable sources play an important role in the current climate world policy, emerging as an efficient way to reduce greenhouse gas emissions that cause global warming. Despite their appeal, renewable sources bring to the fore important challenges on the economic side. In Brazil, the three main renewable sources are wind power, small run-of-river hydro and cogeneration from sugarcane waste. Their highly seasonal yet complementary availability makes individual energy selling through contracts a dangerous option. By taking advantage of the resource mix, the optimal joint risk-adjusted trading strategy creates financial surplus value that can be studied using cooperative game theory. Therefore, the objective of this work is twofold: first, to propose a risk-averse renewable energy hedge pool to jointly sell a single complementary renewable generation portfolio and, second, to analyze different schemes of sharing the financial gains, namely quotas, between the members of such a pool from a cooperative game theory point of view. Results using realistic data from the Brazilian system are discussed and four different quota allocation strategies are analyzed: Energy Proportional, Shapley value, Nucleolus and Proportional Nucleolus.