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A business case for a local community electricity market

Abstract

In this article we try to identify real time economic signals that could drive a local community electricity market. Two pilot projects one in Germany and Italy will try to demonstrate the working of such a market with the purpose of fostering investments into local solar energy and storage. Members of the community should be able to exchange electricity while relying on the electricity retailer as an alternative to locally produced electricity.
In order to make a business case for the local market, one needs to answer the question of what are the local prices based on since the market is coupled to the wholesale market. Also, why would one community member be ready to pay more than another to the same local producer?
We describe the drivers behind the local market. These come mainly from three different sources; avoided network losses, reduced network capacity and a reduced tax burden on the locally produced electricity.
The article argues that excluding taxes, there are short and long term benefits to be gained from active demand side participation. The short term benefits are related to network energy losses and represent at most a few percent of the retail cost of electricity. Long term savings are due to investment deferral and have a very slow dynamic due to the length of the network component lifetime. An optimistic estimate of both types of savings is provided. The article concludes that the economic case for the local market is rather weak, but it could change due to a number of technological and economic trends

Category

Academic article

Language

English

Author(s)

Affiliation

  • SINTEF Energy Research / Energisystemer

Year

2015

Published in

CIRED Conference Proceedings

ISSN

2032-9644

Publisher

CIRED - Congrès International des Réseaux Electriques de Distribution

Volume

2015

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