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Design Optimization of Local Energy Markets
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Design Optimization of Local Energy Markets

A special issue of Energies (ISSN 1996-1073). This special issue belongs to the section "C: Energy Economics and Policy".

Deadline for manuscript submissions: closed (30 April 2021) | Viewed by 21273

Special Issue Editors

Prof. Dr. Ruud Egging-Bratseth

E-Mail Website
Guest Editor
Department of Industrial Economics and Technology Management Faculty of Economics and Management, Sentralbygg 1, 1051 Gløshaugen, Norway
Interests: energy markets; market equilibrium modeling; energy infrastructure; decision making under uncertainty
Dr. Pedro Crespo Del Granado

E-Mail Website
Guest Editor
Department of Industrial Economics and Technology Management, Norwegian University of Science and Technology, 7491 Trondheim, Norway
Interests: energy storage; energy systems modeling; stochastic programming; smart grids; optimization; local market design

Special Issue Information

Dear Colleagues,

We are pleased to announce the Energies Special Issue “Design Optimization of Local Energy Markets”. The rapid decline in investment cost of small-scale renewable electricity generation has made (small-scale) renewable generation a viable option for millions of electricity end-users, thus becoming prosumers. In order to balance supply and demand—even when prosumers are, on average, self-sufficient—temporal mismatches in generation and consumption loads require inflows and outflows from distribution and transmission grids.

In recent years, an increasing number of articles have introduced local electric power and energy market concepts wherein prosumers trade in virtual or physical local markets with other prosumers and consumers, with objectives such as independence, autonomy, cost minimization, and GHG emission cost reduction. Perspectives vary from the overall system to peer-to-peer trading, but do not generally account for the market setting and rules that should allow and facilitate modeling outcomes that may actually produce a more realistic representation.

Market design considers rules for pricing, trading, contracting, and matching, as applied to market participants and the market as a whole. A good design should facilitate market efficiency, liquidity and stability, incentivize the right investments, and allow mitigating of the consequences of risk and strategic behavior.

We hereby invite papers addressing and analyzing market design concepts and issues in local energy markets.

Prof. Dr. Ruud Egging-Bratseth
Dr. Pedro Crespo Del Granado
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Energies is an international peer-reviewed open access semimonthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 2600 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • Pricing and bidding strategies
  • Market mechanisms, trading, and matching
  • Contract design and contracting
  • Peer-to-peer matching
  • Block chain-based markets
  • Local market boundaries and interactions with distribution and/or transmission system operators
  • Local market services to DSO operations
  • Power system analysis
  • Risk and investment incentives

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Published Papers (6 papers)

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Research

20 pages, 1170 KiB  
Article
Framework to Facilitate Electricity and Flexibility Trading within, to, and from Local Markets
by Salla Annala, Lurian Klein, Luisa Matos, Sirpa Repo, Olli Kilkki, Arun Narayanan and Samuli Honkapuro
Energies 2021, 14(11), 3229; https://doi.org/10.3390/en14113229 - 31 May 2021
Cited by 9 | Viewed by 3650
Abstract
Peer-to-peer (P2P) electricity sharing or trading can empower consumers and prosumers, incentivize the balancing of generation and demand locally, increase system resilience and reliability, and help in achieving societal goals, such as increasing renewable energy penetration. Nevertheless, the development of P2P trading in [...] Read more.
Peer-to-peer (P2P) electricity sharing or trading can empower consumers and prosumers, incentivize the balancing of generation and demand locally, increase system resilience and reliability, and help in achieving societal goals, such as increasing renewable energy penetration. Nevertheless, the development of P2P trading in actual environments has been slow due to the unclear position of P2P markets in the power system. Recent developments in the European legislation are promising for the establishment of P2P markets and energy communities. Hence, the interplay between local trading and existing market structures needs to be addressed carefully. Furthermore, P2P trading with distributed resources presumes that electricity end users will become active players in the power system. This paper proposes a bidding and pricing mechanism for local markets, considering the external markets; a new approach to balance settlement and balance responsibility when local trading occurs; and an interface to promote end-user interest in, and interactions with, local energy trading. The proposed local market concept and interface solution promote the coupling between local and existing retail, wholesale and ancillary service markets, and can be seen as a step towards the establishment of local energy markets in real-life settings. Full article
(This article belongs to the Special Issue Design Optimization of Local Energy Markets)
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15 pages, 1393 KiB  
Article
Success Factors for the Foundation of Municipal Utilities in Germany
by Oliver Wagner, Kurt Berlo, Christian Herr and Michael Companie
Energies 2021, 14(4), 981; https://doi.org/10.3390/en14040981 - 13 Feb 2021
Cited by 7 | Viewed by 3056
Abstract
More than 150 municipal utilities (so-called Stadtwerke) were established in Germany from the beginning of the millennium, bringing the total number of Stadtwerke currently established within the country to approximately 900. With responsibility for more than half of the supply of electricity, gas [...] Read more.
More than 150 municipal utilities (so-called Stadtwerke) were established in Germany from the beginning of the millennium, bringing the total number of Stadtwerke currently established within the country to approximately 900. With responsibility for more than half of the supply of electricity, gas and heat in Germany, these Stadtwerke play a central role in the transformation of the energy sector, or Energiewende. In addition, due to their local and regional ties, Stadtwerke have a particular role to play in energy politics, the economy and across society. This article focuses on the motives behind, and grounds for, the current wave of newly established Stadtwerke. Further, it discusses the factors that were critical to the successful formation of new Stadtwerke in recent years. The results of our survey indicate that the establishment of municipal Stadtwerke is a suitable measure to implement the energy transition at the local level, whereby the concept of public value has a high level of importance for the local decision-makers. Collaboration and cooperation, as well as a resilience-oriented strategy, are important success factors for new Stadtwerke. Full article
(This article belongs to the Special Issue Design Optimization of Local Energy Markets)
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19 pages, 1912 KiB  
Article
The Clean Energy Package and Demand Response: Setting Correct Incentives
by Bert Willems and Juulia Zhou
Energies 2020, 13(21), 5672; https://doi.org/10.3390/en13215672 - 29 Oct 2020
Cited by 14 | Viewed by 3293
Abstract
We describe how recent EU regulation affects demand response (DR) and highlight some of the remaining regulatory challenges from a legal and economic viewpoint. With the Clean Energy Package (CEP), the EU has opted for a fully market-based, consumer-centered approach for DR. The [...] Read more.
We describe how recent EU regulation affects demand response (DR) and highlight some of the remaining regulatory challenges from a legal and economic viewpoint. With the Clean Energy Package (CEP), the EU has opted for a fully market-based, consumer-centered approach for DR. The development of business models and products is left to a large extent to market forces. However, to enable the efficient development of those DR markets, network regulation has to adapt. (1) Network tariffs have to become more cost-reflective to provide correct incentives to market participants. The capacity tariffs have to increase, net-metering should be abolished, and optional tariff components for providing flexibility may need to be considered. (2) The regulation for distribution system operators (DSOs) may need to be fine-tuned to reflect their new roles. We present three scenarios: (a) a horizontal merger of unbundled DSOs under incentive regulation, (b) a DSO as a subsidiary of an integrated utility under cost plus regulation, (c) a transfer of some activities from DSO to TSO. Full article
(This article belongs to the Special Issue Design Optimization of Local Energy Markets)
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25 pages, 795 KiB  
Article
An Optimal Peer-to-Peer Market Considering Modulating Heat Pumps and Photovoltaic Systems under the German Levy Regime
by Lissy Langer
Energies 2020, 13(20), 5348; https://doi.org/10.3390/en13205348 - 14 Oct 2020
Cited by 15 | Viewed by 2581
Abstract
The European Commission calls for more small-scale renewable energy producers to actively participate in the energy value chain. In this study, we model an illustrative peer-to-peer (P2P) market with tariffs based on the reservation prices of market participants under the German levy regime. [...] Read more.
The European Commission calls for more small-scale renewable energy producers to actively participate in the energy value chain. In this study, we model an illustrative peer-to-peer (P2P) market with tariffs based on the reservation prices of market participants under the German levy regime. The study is conducted by modeling representative residential buildings with home energy management systems, modulating heat pumps, and photovoltaics, in combination with electrical and thermal storage systems. The resulting mixed-integer linear program is solved over the course of a year, using a rolling horizon approach with a time resolution of one hour. By analyzing the cost- and discomfort-minimizing behavior of the market participants, we evaluate the current levy regime and propose two additional designs. We find that in the current case, a P2P market is not economically viable. Based on feed-in tariffs (FiT) and levies no agreeable market price can be found. With no FiT or reduced levies, all participants benefit from the P2P market. The market split—where each household sources their energy from—is altered only little by the specific details of the market design when staying in the agreeable price range. As prosumagers do not consume on the P2P market, they benefit only marginally from the reduced levies—consumers are most affected. Adjusting the regime could be a measure to rebalance the distribution of renewable energy benefits towards consumers in order to foster social cohesion. Our input data and the model written in the Julia JuMP programming language are available in an open-source format. Full article
(This article belongs to the Special Issue Design Optimization of Local Energy Markets)
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26 pages, 1754 KiB  
Article
On Distributional Effects in Local Electricity Market Designs—Evidence from a German Case Study
by Alexandra Lüth, Jens Weibezahn and Jan Martin Zepter
Energies 2020, 13(8), 1993; https://doi.org/10.3390/en13081993 - 17 Apr 2020
Cited by 24 | Viewed by 5373
Abstract
The European Commission’s call for energy communities has motivated academia to focus research on design and trading concepts of local electricity markets. The literature provides a wide range of conceptual ideas and analyses on the technical and economic framework of single market features [...] Read more.
The European Commission’s call for energy communities has motivated academia to focus research on design and trading concepts of local electricity markets. The literature provides a wide range of conceptual ideas and analyses on the technical and economic framework of single market features such as peer-to-peer trading. The feasible, system-wide integration of energy communities into existing market structures requires, however, a set of legal adjustments to national regulation. In this paper, we test the implications of recently proposed market designs under the current rules in the context of the German market. The analysis is facilitated by a simplistic equilibrium model representing heterogeneous market participants in an energy community with their respective objectives. We find that, on the one hand, these proposed designs are financially unattractive to prosumers and consumers under the current regulatory framework. On the other hand, they even cause distributional effects within the community when local trade and self-consumption are exempt from taxes. To this end, we introduce a novel market design—Tech4all—that counterbalances these effects. With only few legal amendments, it allows for ownership and participation of renewable technologies for all community members independent of their property structure and affluence. Our presented analysis shows that this design has the potential to mitigate both distributional effects and the avoidance of system service charges, while simultaneously increasing end-user participation. Full article
(This article belongs to the Special Issue Design Optimization of Local Energy Markets)
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18 pages, 667 KiB  
Article
On the Sensitivity of Local Flexibility Markets to Forecast Error: A Bi-Level Optimization Approach
by Delaram Azari, Shahab Shariat Torbaghan, Hans Cappon, Karel J. Keesman, Madeleine Gibescu and Huub Rijnaarts
Energies 2020, 13(8), 1959; https://doi.org/10.3390/en13081959 - 16 Apr 2020
Cited by 2 | Viewed by 2132
Abstract
The large-scale integration of intermittent distributed energy resources has led to increased uncertainty in the planning and operation of distribution networks. The optimal flexibility dispatch is a recently introduced, power flow-based method that a distribution system operator can use to effectively determine the [...] Read more.
The large-scale integration of intermittent distributed energy resources has led to increased uncertainty in the planning and operation of distribution networks. The optimal flexibility dispatch is a recently introduced, power flow-based method that a distribution system operator can use to effectively determine the amount of flexibility it needs to procure from the controllable resources available on the demand side. However, the drawback of this method is that the optimal flexibility dispatch is inexact due to the relaxation error inherent in the second-order cone formulation. In this paper we propose a novel bi-level optimization problem, where the upper level problem seeks to minimize the relaxation error and the lower level solves the earlier introduced convex second-order cone optimal flexibility dispatch (SOC-OFD) problem. To make the problem tractable, we introduce an innovative reformulation to recast the bi-level problem as a non-linear, single level optimization problem which results in no loss of accuracy. We subsequently investigate the sensitivity of the optimal flexibility schedules and the locational flexibility prices with respect to uncertainty in load forecast and flexibility ranges of the demand response providers which are input parameters to the problem. The sensitivity analysis is performed based on the perturbed Karush–Kuhn–Tucker (KKT) conditions. We investigate the feasibility and scalability of the proposed method in three case studies of standardized 9-bus, 30-bus, and 300-bus test systems. Simulation results in terms of local flexibility prices are interpreted in economic terms and show the effectiveness of the proposed approach. Full article
(This article belongs to the Special Issue Design Optimization of Local Energy Markets)
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