Local Market Places: Market design options

Karsten Neuhoff, Seabron Adamson, Luis Olmos, Anthony Papavasiliou, Silvia Vitello, Konstantin Staschus and Leon Stolle

EconStor Research Reports from ZBW - Leibniz Information Centre for Economics

Abstract: Motivation: As the share of renewables in power generation increases, the system needs greater flexibility to ensure that wind and solar energy, which might otherwise be curtailed due to mismatches in time and location of supply and demand, can be stored or transmitted to where and when they are needed or most valuable. Local market prices are essential to make use of demand side flexibility and storage. At times and locations of high renewable production, the prices tend to be low, and heat, hydro, battery and intermediary product storage can be filled. Vice versa, in periods of low renewable production, the stored energy can be released. As local market prices encourage market participants to behave consistently with system needs, they increase predictability of flow patterns and thus require lower security margins to reach the same level of system security. The increased network utilization allows for increased pooling and sharing of flexibility across regions. (...)

Date: 2025
Note: Results of a Workshop of the Future Power Markets Platform (FPM), Brussels, July 2nd, 2025
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