12-13 September 2023
Copenhagen, Denmark
#SESAAU2023
Market Power in
Local Multi-Energy Markets
Local Energy Markets (LEMs) are a promising approach to integrating renewable energy resources:
- Electricity LEMs help alleviating grid bottlenecks [1]
- LEMs reduce entry barriers for small players [2]
- LEMs mitigate social resistance to new renewable energy projects closeby [3]
Thermo-electric LEM.
Thermal-Electric LEM Design studies often solve the market clearing as a social-welfare maximization ([4-5])
The perfect competition assumption is questionable:
- Small number of agents
- Much larger electricity market already suffered from market power abuse (California energy crisis 2000)
Which leads to the question:
Consumers are assumed price-takers with a quadratic utility function.
Generation: Supply of a commodity from some energy form for which no LEM exists.
Storage: Storage energy and retrieving at a later time.
Conversion The transformation between two energy commodities for which a LEM exists.
All agents are price-takers and the market outcome maximizes the social welfare.
Suppliers are profit maximizer strategic players
Perfect vs Imperfect Competition
Repeatedly increased the number of agents of a type, without increasing the total capacity of the type.
- Reduction of consumer surplus in oligopolistic competition.
- Market power reduces as the number of agents increases.
- Producer surplus significantly increases with oligopolistic competition.
Adding a regulated agent that can place an unlimited supply bid at a fixed regulated price.
Diversifying the local energy mix by adding new agent types.
Mitigation Strategies
- Both strategies increase consumer surplus, however, SLR is significantly more efficient.
- Diversification increases market efficiency and producer surplus.
- SLR reduces producer surplus and market efficiency.
- Thermo-electric LEMs are highly susceptible to market manipulation, which should be considered in the design of such markets.
- A well-chosen mix of technologies in an LEM can contribute to avoiding abuse of market power.
- What is the energy mix that best mitigates market power?
This presentation
https://slides.sesaau23.juliabarbosa.net
Contact:
julia.barbosa@eins.tu-darmstadt.de
mail@juliabarbosa.net