Pricing Mechanisms' Impact on Welfare Distribution in Energy Communities with Energy Storage

Efficient pricing mechanisms that forms appropriate pricing signals are crucial when introducing energy storage to energy communities and local electricity markets. However, the lack of standardised testing makes comparing the performance of existing pricing mechanisms challenging. In this study, we evaluate three pricing mechanisms: the supply-demand ratio mechanism, the consensus alternating direction of multipliers method and the equilibrium approach, under identical conditions. The analysis focuses on the economic impacts of these mechanisms on different customer types within the local electricity market - specifically, flexible and inflexible prosumers, and consumers. Notably, we find that the supply-demand ratio pricing mechanism, in its current form, is not viable for flexible prosumers due to negative cost-savings compared to direct trade with the retailer. The equilibrium approach demonstrates the best overall performance.