Local Energy Markets: Structural Elements and the Effects of Upscaling

Local energy markets (LEM) have attracted a lot of interest in recent years, as an innovative approach for enabling the direct trading of energy between peers within localized areas. The optimal usage of locally produced energy and the cost-effectiveness that can be achieved by avoiding suppliers and aggregators markups are among the benefits the LEM are expected to bring together with the further incentivisation of investments in flexible distributed energy resources (DER) and the reduction of transmission losses. Although the wide adoption of the concept is in its early stage, the interactions of the newly established LEM with the existing market structures that govern the energy and balancing service provision have not been sufficiently studied. This work reviews structural elements of local interaction schemes, introduces coordination styles, and by modelling centrally operated LEM and simulating the wholesale market (WSM) operation, investigates the coupling between prices and focuses on the effects that the different levels of LEM concept adoption may have on WSM. Through a benchmarking case study, scenarios that differ in the mix of DER and the market share of LEM are considered, with the results revealing the effects on WSM outcome and the underlying dependencies in terms of market volume and price trends.