*3.11. Local Market Operator*

Currently, local electricity markets (LEMs) are probably the least developed component of smart grids. The implementation of electricity markets in the last 20 years did not result in a significant reduction in the price ties of the energy or the increment of opportunities for most of the final consumers. Local markets are being designed to bring competitive advantages to these consumers, by implementing local trading (peer-to-peer) either directly or through aggregators and VPPs [43].

LEMs need to be reliably established to enhance the fair trading for customer-owned renewable generation and flexible resources.

This requires the development and implementation of dynamic and automatic trading platforms, for the negotiation of energy for short periods of time (shorter than the ones applied to wholesale markets) and probably closing a minute before delivery. LME platforms have to o ffer consumers, aggregators, and VPPs the chance to virtually trade energy services in a geographically constrained area [61]. These markets complement wholesale markets and bilateral contracts that do not have the capability to react in real time to the myriad of small demand resources and distributed generation [62]. The LMO manages and operates the LEM from an independent perspective, enabling a more dynamic trading of electricity.

Its main activity is to promote the diversity and competitiveness of the market, while ensuring the correct functioning of it by matching buying and selling bids. Furthermore, they have to monitor all the energy transactions to communicate them to the DSO to ensure a reliable operation under the technical limits. This information is provided according to the geographic control area of the DSO associated with the LEM.

The main components that characterize the LMO are the trading platforms that it controls to manage all the bids to buy and sell products. All these agents have to be in a local area and interconnected in a distribution grid. This allows a fast negotiation process and a dynamic response to prices.

Due to its role of market operator, the LMO receives payments from all the agents participating in this market. The local market manages payments among the participating agents; to do so, a minimum level for buying (EL-B) and selling (EL-S) electricity in these markets is established depending on its size. While generators and VPP agents receive payments for the energy traded, consumers and retailers pay for it. As in other markets, the storage has bidirectional energy flows, having the capacity to buy and sell electricity. Finally, consumers, storage, and generators pay an established fee for participating in the market directly or throughout a third party.
