Allocation of nodal costs in heterogeneous highly renewable European electricity networks

We consider a simplified model of a future European electricity network with a high share of renewable generation. In a cost optimal design of such a system, most of the renewable generation capacity is placed at locations with favorable weather conditions, that is for instance onshore wind in countries bordering the North Sea and solar PV in South European countries. Countries with less favorable renewable generation conditions benefit from this capacity by importing the respective electricity as power flows through the transmission grid. Using flow tracing techniques, we disentangle the emerging pattern of imports and exports and assign shares of the distributed generation capacity in the European system to the countries which actually make use of them. This procedure yields nodal levelized costs, which incorporate both internal and external generation costs associated with the electricity consumption in a country.