Fair investment strategies in large energy communities: A scalable Shapley value approach

• Published in: Energy (Oxford) 2024-05, Vol.295, p.131033, Article 131033
• Main Authors: Alonso Pedrero, Raquel, Pisciella, Paolo, Crespo del Granado, Pedro
• Format: Article
• Language: English
• Subjects: Cooperative game theory; Energy communities; Investment models; Investment strategies; Payoff allocation
• ISSN: 0360-5442
• DOI: 10.1016/j.energy.2024.131033

Energy communities based on joint investments of energy assets might enable the democratisation of the power system by enabling all individuals to become active participants. Adopting this investment strategy requires ensuring fair economic value distribution among investors. Some studies propose using the Shapley value, given its uniqueness in fairly allocating value. However, this method suffers from scalability issues due to its computational demands. This paper introduces the Nested Shapley value as a new sharing mechanism to allocate profits to members of large coalitions fairly, thereby addressing the fairness-scalability dilemma. In conjunction with a cooperative investment model for communities with multi-dwelling buildings, the method is applied to assess individual preferences toward investment strategies in a real-world case study. The Nested Shapley value is demonstrated to encourage residents to opt for joint investments over individual strategies. Also, if combined with adequate governance structures, this payoff allocation could lead to the selection of resource-efficient investment strategies within residential communities. Furthermore, the Nested Shapley value is proven to satisfy two of the four fairness axioms defined for the Shapley value. A third one is also satisfied, albeit under specific conditions. •Design of an investment model to distribute value in multi-dwelling neighbourhoods.•Jointly investing leads to better use of resources in multi-dwelling neighbourhoods.•Formulation of the Nested Shapley value for value sharing in large coalitions.•The Nested Shapley value encourages most members to opt for joint investing.•Decision-making analysis based on governance structures and the Nested Shapley value.