Overcoming barriers for the adoption of Local Energy and Flexibility Markets: A user-centric and hybrid model

Abstract

To achieve the European climate targets and the Paris Agreements, at least 65% of the electricity needs to be generated from renewable energy sources by 2030. This requires a significant increase of distributed energy resources, posing a challenge for distribution system operators to integrate them into existing hierarchical grids. The concept of Local Flexibility Markets has recently gained attention as a market-based tool to tackle this challenge, making use of demand side flexibility. In this paper a Delphi method has been performed, showing that there are still numerous barriers in place preventing a widespread adoption of such markets in Europe. The main obstacles for market participants refer to standardisation issues. Based on that, a hybrid market model has been developed, comprising elements of a Local Flexibility Market and a Local Energy Market. To activate demand side flexibility from local energy transactions, spatio-temporally varying price signals are introduced, reflecting the constraints of the distribution grid. The paper shows, that this novel market approach helps to overcome relevant standardisation issues, but also certain barriers regarding end-users’ lifestyles, which is because prices are comprehensible signals that can motivate end-users to participate. Moreover, a set of numerical examples is provided to illustrate the monetary benefits that could be gained by consumers and prosumers in the proposed hybrid market model. The examples show that the major share of the cost savings result from local energy trading, but the hybrid market model is also able to accumulate additional smaller revenues from providing flexibility. Finally, the systematic approach of characterising the market model in this paper offers a valuable framework for other researchers to map their ideas among existing approaches of Local Energy and Flexibility Markets.

Highlights

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  A framework for characterising Local Energy and Flexibility Markets is provided.

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  Main barriers for adopting such markets are related to standardisation issues.

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  A hybrid market model is proposed, featuring local energy and flexibility trading.

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  Trades are steered by dynamic price signals, reflecting various flexibility needs.

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  Numerical examples indicate the expected financial implications.