On Distributional Effects in Local Electricity Market Designs—Evidence from a German Case Study

Alexandra Lüth, Jens Weibezahn and Jan Martin Zepter
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Alexandra Lüth: Copenhagen School of Energy Infrastructure (CSEI), Copenhagen Business School (CBS), Porcelænshaven 16 A, 2000 Frederiksberg, Denmark
Jens Weibezahn: Workgroup for Infrastructure Policy (WIP), Technische Universität Berlin, Sekr. H 33, Straße des 17. Juni 135, 10623 Berlin, Germany
Jan Martin Zepter: Center for Electric Power and Energy (CEE), Technical University of Denmark (DTU), Frederiksborgvej 399, 4000 Roskilde, Denmark

Energies, 2020, vol. 13, issue 8, 1-26

Abstract: The European Commission’s call for energy communities has motivated academia to focus research on design and trading concepts of local electricity markets. The literature provides a wide range of conceptual ideas and analyses on the technical and economic framework of single market features such as peer-to-peer trading. The feasible, system-wide integration of energy communities into existing market structures requires, however, a set of legal adjustments to national regulation. In this paper, we test the implications of recently proposed market designs under the current rules in the context of the German market. The analysis is facilitated by a simplistic equilibrium model representing heterogeneous market participants in an energy community with their respective objectives. We find that, on the one hand, these proposed designs are financially unattractive to prosumers and consumers under the current regulatory framework. On the other hand, they even cause distributional effects within the community when local trade and self-consumption are exempt from taxes. To this end, we introduce a novel market design— Tech4all —that counterbalances these effects. With only few legal amendments, it allows for ownership and participation of renewable technologies for all community members independent of their property structure and affluence. Our presented analysis shows that this design has the potential to mitigate both distributional effects and the avoidance of system service charges, while simultaneously increasing end-user participation.

Keywords: mixed complementarity problem (MCP); energy communities; distributional effects; electricity market design; peer-to-peer trading; local energy sharing (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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