Local electricity market pricing mechanisms' impact on welfare
distribution, privacy and transparency
Abstract
Local energy communities and electricity markets have emerged as
possibilities for interaction among prosumers. A substantial effort has
been invested into creating efficient pricing mechanisms for various
market arrangements, all of which take into consideration distinct
characteristics of local electricity trading. However, since they are
all evaluated in terms of various systems and market conditions, it is
challenging to directly compare the mechanisms. In this research, three
well-established pricing mechanisms from the literature are
systematically compared and evaluated under identical settings on their
influence on welfare distribution across various market participant
groups, privacy protection, transparency and complexity level. According
to the findings, the supply-demand ratio pricing system leads to the
lowest costs for consumers and is also the most privacy compliant and
transparent. Furthermore, prosumers obtain the highest cost-savings
through the consensus alternating direction method of multipliers
pricing mechanism, whereas the equilibrium pricing mechanism performs
best regarding economic fairness. The aim of this article is to provide
insight into the performance of different pricing mechanisms to energy
regulators and local electricity market facilitators. The comparative
analysis should aid in making informed decisions on the implementation
of local electricity markets.