This document discusses the development of local electricity markets to encourage distributed energy resources and active participation of local energy producers and consumers (prosumers). It outlines the EMPOWER project's approach to designing a local market place that uses innovative business models and operational methods. The market aims to maximize local energy production and consumption over time, while exploiting flexibility options to balance supply and demand locally when mismatches occur. It discusses key considerations like being user-centric, competitive, and economically sustainable. Early field results from one pilot site show increased local energy capacity and DER sales.

1. local Electricity retail Markets for Prosumer smart grid pOWER services
This project has received funding from the European Union’s Horizon 2020 Research and
Innovation programme under Grant Agreement No 646476.
Bernt A. Bremdal, SmartIO
WP6 Workshop
Oslo, September 15th, 2016
WP6: Market Design for Local Energy Trade

2. Content
• The EMPOWER ambition
• Background and requirements
• Overall approach
• Local market, contracts and trade
• Cross-market operations
• Early field results

3. “Develop and verify a local market place and innovative
business models, including operational methods to
encourage micro-generation and active participation of
prosumers to exploit the flexibility that this creates, for the
benefit of all connected to the local grid.”
The EMPOWER ambition

4. • The primary objective of this work package is
to explore the theories on the micro-market
and capitalize on former research related to
market design and trading in a smart grid
setting.
• The idea is to synthesize this and specify a
concise market arena that can support trading
at the user end of the supply chain in a full
scale, real-time environment of prosumers
and surrounding supply system.
WP6 objectives

5. Background and requirements

6. – Should encourage micro-generation (DER)
– Must be user-centric
 should stimulate active participation of prosumers and consumers
– Should exploit end-user flexibility for the benefit of all involved
– Must be competitive
– Must be economically sustainable
– Be adaptable to different regulatory regimes
Main requirements

7. The local market
“A micro-market is a local trading arena in the LV/MV grid
characterized by strong user involvement, a high degree of
innovation and continuous customization”

8. Three cases of local market

9. Maximize: Ep = 0
𝑇
Ep(t)
V = 0
𝑇
Ep(t) + Ec(t) - ε(t)
Ep(t) + Ec(t) + ε(t) + 𝐾𝛿(t) = 0
V = the volume of energy contracted locally over contract period T
Ep = local production
Ec = local consumption
ε(t) is the instant flow of energy across the CoPP, εmin < ε(t) < εmax
𝐾𝛿 is total available flexibility that the SESP controls
The EMPOWER ambition translated

10. Ep
Ec
Local Local
supply demand
Challenge No.1: Building local capacity
Also room for
import/export within limits (ε) to
manage periodic mismatches
In-
crease
Consumed locally
Maximize local supply over time period T with distributed, renewable resources

11. Ep
Ec
Ep
Ec
Local Local
supply demand
Local Local
supply demand
Matching contracts
Max possible
capacity that can
be contracted
locally during time T
Contract match for
Vp = Vc = ∑TEc(t)
Max possible
capacity that can
be contracted
locally during time T
Contract match for
Vp = Vc = ∑TEp(t)
Export
Import
Case 1 Case 2

12. Ep(t)
Ec(t)
Local Local
supply demand
at time instant, t
The role of flexibility
𝐹𝑙𝑒𝑥: 𝐾1𝛿(t)
ε(t)
Temporary mismatch
between supply and
demand at any instant t can
create a problem for the
distribution system
εmin < ε(t) < εmax
Ep(t)
Ec(t)
Local Local
supply demand
at time instant, t
𝐹𝑙𝑒𝑥: 𝐾2𝛿(t)
ε(t) εminεmax

13. Local market must be competitive
Local
price &
unit cost
= P4
Local
supply
Local price and
unit cost (p4)
for supplier
must be higher
than
p3 + c3
Import
price &
unit cost
= P3 - C3
Local
price &
unit cost
= P2
Local
demand
Local price and
unit cost (p2) for
supplier
must be less
than
p1 + c1
Import
price &
unit cost
= P1 +C1
Demand side: P1 + C1 > P2 Supply side: P3 + C3 < P4
If P1 = P3 Competitive latitude will be: C1 – C3
For local trade to be attractive:
This means that tariffs, taxes, commissions
must be lower or eliminated OR…………..

14. Local
Market
Central
Market
Price signal
........ Add other type of value
Added value (Flexibility sale) Added value (Reward points)
Added value (discounts on
services and products)
Added value (lower prices through cross-subsidies)
• What does this added value imply?
• Answer: Multiple aspects – not price aspects alone
• Where does this added value come from?
• Answer: From the community itself
Added value (Support
And financing)

15. Overall approach

16. • Local versus global business concepts
• Isolated versus connected markets
• Mechanisms that help to ramp up DER
– Lasting perspectives
• User centricity
– Energy cooperatives and shopping clubs
– Demand-response and AMS failures
– Community approach
– Talking to people
• Competitiveness
– Added value drivers
– Non-monetary reward mechanisms for engagement
– Cross subsidies
• Continuous versus non-continuous trading
– Multi-agent systems
– Problems with information flow
– Problems with risk
• The platform business concept (WP2)
– Network markets
Investigations

17. Energy cooperatives
• Voluntary
• Solidarity
• Social recognition
• Take control of personal «green
future»
• Together we are strong
• Working together – achieving
together
• Local social welfare
• Patriotism
• Leveraging market power
• Increased influence
• Co-ownership
• Cost sharing
• more
Energy Community formation requires dialog

18. • Weak value boosters
– Green energy
– Local energy
– Lower commission
– Minor price differences on energy
• Medium value boosters
– Consumer membership
 Influence
 Recognition and loyalty rewards
 Shared faith and cooperation
 Local and green energy
– Capitalization on flexibility
• High value boosters
– Distinct price differences on energy
– Add-on services and products
 Discounts
 Immediateness
 Availability
 Endorsement
 Local
 Complient
– Bonuses (community currency)
– Green certificates
– Smart capitalization on flexibility
Added value drivers

19. Network markets

20. Local markets, contracts and trade

21. 21
SESP = Smart Energy Service Provider
Provider of:
• An arena for local exchange of energy and flexibility
• A set of consolidated services («service in the cloud»)
• Contract templates
• Market liquidity (market making)
SESP

22. • Hybrid, integrated market for
– Energy trade
– Flexibility trade
– Service trade
– Neighbourhood is a natural community
• Community forms a network market
– Membership
• SESP takes all risk by default
– Mitigates this through different ations
• Long(er) term contracts
– The EMPOWER local market deals primarily in energy derivatives and
forward contracts
– SESP secures
 physical balance with DSO
 contractual equilibrium
• SESP and community members takesadvantage of meta-flexibility
– The liberty to choose the most affordable/less stringent source of
flxibility
Base line

23. Ask/bid
WHOLESALE
MARKET
Ask
Market agent
(power plant)
Market agent
(power plant)
Market agent
(retailer)
Local market
participant
(consumer)
Local market
participant
(prosumer)
Local market
participant
(producer)
Other
services
market
Bid
Ask/bid
Market agent
(retailer)
RetailerAsk/bidBid
Ask
Bid
Ask/bid
Ask/bid
LOCAL MARKETSESP coordinates the local
market
Local market participant
(other service provider)
Ask
Bid
Hybrid market

24. «Aggregator»«Community market manager»
Two worlds meet

25. An integrated, hybrid market
Community
Services
Community
Energy
Community
Flexibility
DSO
TSO
• High attraction value
• Exploits local market power
• High margin services/products
• High awareness offers
• Medium coalition potential
• Emphasizes the local
• Community must be built
Contribution:
• Community attraction & retainment
• Sing-in fee/price cut
• Can co-finance energy operations
• More renewable
• More efficiency
• Community in place
• Low margin commodity
• Low awareness offers
• High coalition potential
• Local production – local
consumption
Contribution:
• Life essential commodity
• Community glue
• Climate focus
• Base value
• Requires cooperative effort
• Potentially high added value
• Low awareness of opportunity
• Significant barriers (privacy)
• Low coalition potential
• Local solution needed (DSO)
• Community must be built
Contribution:
• Solves a power problem
• Can co-finance energy operations
• Increased reward
• Can co-finance energy

26. – Loose coupling
 Each market operates side-by-side
 Separate contracts and trade
 Synergies harvested through shared
management
– Tight coupling
 One common market
 Hybrid contracts (combos):
» Energy + Flexibility
» Energy + Services
» Energy+Felxibility+ Services
Two types of integration

27. Each market reinforces the other
Community
Services
Community
Energy
Community
Flexibility
DSO
TSO
• Attraction
• Energy efficiency
• Cool factor
• Cross
subsidies
• Improved
control
• More DER
• Easier participation
• Increased
attractiveness
• More LEMS /Ready connections
• More awareness
• Increased security
• More flexibility
• More demand for services and
support
• Increased recruitment of
service/products and providers
• Cross
subsidies
• Improved
control
• Increased need
• More community
members

28. Example: Energy seller’s contract

29. Example: Energy buyer’s contract

30. Example: Scheduled flexibility option
Contract SESP – DSO

31. Contract SESP – Community member
Example: Scheduled flexibility option

32. Example Specification Example
Name of buyer string Peter Gabriel
Date of endorsement date Feb 12, 2016
Date of initiation date March1, 2016
Date of termination date April 1, 2016
Energy profile [kWh] reference http://cllientbase/246735
Preferences 1
(renewable/indifferent)
string Renewable
Preferences 2
(local/indifferent)
string Local
Preferences (self-controlled/not-
controlled)
string Self controlled
Base price (€-cent/kWh) number 3 €-cent
Flexibility option
𝑲 𝜹= 500W (see conditions)
number -0,3 €-cent
Flexibility option
𝑲 𝜹= 500W (see conditions)
number -0,6 €-cent
Diagnosis & repair option
(see conditions)
number +0,2 €-cent
Example: Combo contract

33. P
C
C
P
P
S
SESP
Price sell(Vp,p)
Price buy(Vc,p)
C
o
u
n
t
e
r
Two types of trade
Over-the-counter trade Price scan auction

34. Price scan auction
• Call auction by price scanning
– SESP evaluates assets, ε + 𝐾𝛿
– SESP evaluates stte of market i.e. price
– SESP makes the first price call
– Sellers and buyers nominate or abstain
– Balance is checked
 If satisfactory – clear market and settle
 Else continue
– One base price
– SESP offers mark-ups and discopunts

35. Preference curves
User preferences can be modelled as sigmoid curves
Increased call price 
Willingness to negotiate
Probability of a buy/
sales decision

36. 0
0,2
0,4
0,6
0,8
1
1,2
-5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8
Buy P(buy|price)
Sell P(sell|price)
Conditional probabilities that two agents will reach a settlement
Crowd intelligence makes the Nash
Probability
First call price from the auctioneer

37. Cross-market operations
Assuring balance and system integrity
Compensating for physical mismatches during
contract period

38. 39
Time-line

39. Engagement
Attracting end-users

40. The engagement process

41. Early field results 1 pilot site only
Launched simplest form of contract (see image) Nov 2, 2016
No. of established energy neighborhoods – zone
level
4
No. of new members 20 (50)
No. of super users volunteered >10
Type of user delivered support/services shared Apps,
videos,support
services, janitor
services etc.
No. of external suppliers requesting access 15+
Community battery delivered and installed installed 1
Increase in PV sales 20%
Increase in local DER capacity 100%
Increase in sales of monitoring gadgets 40%???
Competitors 2
As of Jan 25, 2017

42. Community platform

43. • SESP as a ledger
– Blockchain
– Club coins
– Smart contracts
– Intelligent agents
• Storage
– More batteries
 Behind and in front of the meter
• Hyper-trade
– Use of batteries
– High frequency algorithmic/batch trade
– Intelligent agents
Beyond EMPOWER

44. This project has received funding from the European Union’s Horizon 2020 Research and
Innovation programme under Grant Agreement No 646476.
local Electricity retail Markets for Prosumer smart grid pOWER services