• Environmental and Resource Economics Review
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• v.31 no.4
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• pp.571-595
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• 2022

This study theoretically analyzes the cost allocation of replacement costs that occur when existing operators have to replace circuit breakers due to the entry of new generators. We adopt the sequential equal contributions rule as the cost allocation rule, which is widely used in cost allocation problems in cooperative game theory. We derive various cost allocation plans based on several criteria and examine to what extent each alternative meets various desirable axioms. According to the analysis, (i) the alternative that excludes the cost of the new operator, residual value, and network operator and (ii) the alternative that excludes the cost of the new operator, residual value, and includes network operator are relatively superior to other schemes. We also identify a realistic plan by taking into account practical factors and analyze its axiomatic characteristics.