For instance, countries with abundant flexible generation, such as hydro in Norway, may be responsible for a large fraction of the cost savings that result from an integrated NSOG network.
In a report by the North Seas Countries' Off shore Grid Initiative (NSCOGI, 2014) the authors consider the SV as one possible mechanism to allocate transmission costs among cooperating countries in the NSOG, but that study ignores the possibility of using side payments to achieve a fair distribution of net benefits.
Figure 4 shows the final allocation of net benefits for all countries in the NSOG with respect to the Base Case (i.e., when no transmission interconnections are built).
Belgium and the Netherlands will free ride on the rest of the countries in the NSOG because they will bear no costs, even though the new interconnections will provide positive net benefits to these two third-party countries.
Finally, we want to highlight that the proposed mechanism to redistribute net benefits and costs among countries in the NSOG is akin to the existing mechanism for inter-TSO compensations in the EU.
Since this is also true for the rest of the countries in the NSOG and all possible subsets of the grand coalition, the cooperative game is convex and the final allocation of net benefits computed using the SV is in the core.