A Novel Design for Electricity Markets based on the Cellular Approach

The increasing number of mainly small-scale renewable energy sources and sector-coupling units poses technical and market-related challenges in terms of a cross-sectoral market and system operation. The cellular approach (short: CA), based on the principle of energy subsidiarity, is considered a promising approach for the future energy system. In particular, the effort of data processing can be reduced effectively, since, exclusively (hierarchically) neighboring ECs are communicating. However, the design of an appropriate market structure has not yet been solved, especially in terms of achieving consistent pricing while limiting data exchanges between ECs. Therefore, this paper introduces a hierarchically organized electricity market design with decentralized operation elements for the CA. Based on the concept of independent system operators (ISOs) and important elements of the European regulatory framework, the approach unifies the technical advantages of CA with the economical ones of markets with independent system operators. Relevant market entities are presented and the governance structure of the ISOs is discussed.