Practical perspectives on local energy market theory - analysis of their impact on renewable energy prices

Abstract

The advancement of Local Energy Markets signals a transformative change in the electricity sector towards decentralized renewable energy. They reduce dependence on traditional energy suppliers by providing an innovative market platform for participants to trade their locally generated renewable energy. A structured literature review provides an overview of current research. However, this review of extant literature has unveiled significant gaps between theory and real world application of LEMs. To bridge these gaps, interviews with both, leading researchers and industry experts were conducted and synthesized with insights from literature. This synthesis across four key domains revealed two main tensions that hamper effective implementation of LEMs. First, there is a trade-off between complexity and simplicity. While model intricacy augments efficiency in theory, simplicity is a main driver for adoption of end-users. The second tension addresses the issue of initiating LEMs in practice. While consumers are not actively engaging in important decision-making and lack empowerment, current regulations struggle to provide frameworks and incentives that enable, promote, or facilitate the adoption of LEMs. Subsequently, derived implications for service design, business strategy and policymakers serve as baseline for practical recommendations. Concluding, LEMs' widespread implementation may be a decade away but their potential to contribute to a sustainable energy future is prominent.