A game-theoretic analysis of the synchronization of the Baltic States’ electricity networks with Continental Europe
Amy Myers Jaffe, Director of the NYU SPS Energy, Climate Justice, and Sustainability Lab, co-authored a recent journal article in Energy Policy
Electricity grids and geopolitics: A game-theoretic analysis of the synchronization of the Baltic States’ electricity networks with Continental Europe
Songying Fang, Amy Myers Jaffe, Ted Loch-Temzelides, Chiara Lo Prete
Abstract
Can the supply of electricity be used as an energy weapon? This question rises in importance as more countries trade electricity across borders to smooth out grid stability issues and improve cost-efficient dispatching across large geographic areas. In the context of the Baltics’ disentanglement from the BRELL (Belarus, Russia, Estonia, Latvia, and Lithuania) electricity grid and synchronization with Europe, we develop a game-theoretic model and examine the strategies of the involved parties in light of the potential for electricity trade to be used as a geopolitical weapon. We conceptualize the process of the synchronization project as a sequential move game between three actors (Russia, the Baltic states, and the EU-U.S.). Our findings suggest that, in large part due to reputational concerns, Russia is unlikely to cooperate in the synchronization process. Instead, our model predicts that Russia will not wait for the Baltic states to complete their synchronization with the European grid before disconnecting them from the BRELL system. Direct Russian cyberattacks against Baltic grids are not implemented and the Baltics do not have to make concessions, provided that Western allies signal a strong likelihood of deterrent retaliation. We offer policy recommendations for Europe, Russia, and the Baltic states.
