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Local Power Markets

Pio Baake, Sebastian Schwenen () and Christian von Hirschhausen

No 1904, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: In current power markets, the bulk of electricity is sold wholesale and transported to consumers via long-distance transmission lines. Recently, decentralized local power markets have evolved, often as isolated networks based on solar generation. We analyze strategic pricing, investment, and welfare in local power markets. We show that local power markets with peer-to-peer trading are competitive and provide efficient investment incentives, even for a small number of participating households. We identify positive network externalities that make larger markets more attractive but lead to inefficiencies where networks compete. Collectively, our results present a set of positive efficiency results for peer-to-peer electricity markets.

Keywords: Market design; networks; peer-to-peer markets; electricity (search for similar items in EconPapers)
JEL-codes: D16 D26 D47 L94 (search for similar items in EconPapers)
Pages: 32 p.
Date: 2020
New Economics Papers: this item is included in nep-com, nep-ene and nep-reg
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