Vote for your energy: a market mechanism for local energy markets based on the consumers’ preferences

Local energy markets (LEMs) are a highly discussed topic in the academic community. In this paper, we address one of the most critical challenges for these markets. In recent years the valuation of energy sources by the consumer became more differentiated. Today many consumers prefer various energy sources (e.g. PV or Wind) in different degrees. Taking this distinction into account causes several challenges in the market design as energy becomes a heterogeneous good. We show that already existing auction mechanisms cannot provide a satisfactory solution to represent these differences. As a result, we propose a two-step mechanism specifically tailored for the differing consumer valuations. It introduces a merit-order based market for each type of energy. Thus, each separate market deals with one source of energy and is cleared separately. With that, the determination of the chronological order of the different markets becomes essential. The proposed mechanism aims at taking the various preferences of all consumers into account by using the Borda count voting mechanism. The theoretically presented market mechanism is supported by a real-life data case study with data from the Landau Microgrid Project.