Market Design for a Decentralized Integrated European Energy Transformation

The European Commission, with its ""Clean Energy for all Europeans"" package, calls for stronger participation of residential electricity consumers—individually or through communities—in the energy value chain, that is, production and sharing as well as flexible and responsive demand.

While European legislation is promoting the end user of electricity (and therewith, both, the consumer and so-called prosumer) as a key player in the future market, national regulation is often not proceeding fast enough in this transition process.

While pilot projects in many countries have shown the technical and economic feasibility of energy communities in Europe and around the world, the impact of widespread implementation on existing markets remains unclear.

In theory, these local electricity markets could form a bridge between decentralized electricity production and wholesale electricity exchanges as well as driving investments in distributed energy resources without governmental subsidies.

Yet, research on local market designs and associated features developed on the basis of pilot projects is still in an early stage, especially in regard to regulatory and economic frameworks.

Subsequently, there is a mismatch between developed market designs and their feasibility in the current regulatory framework.

The project NRGcitizen will therefore address the following research questions: What are advantages and disadvantages of a decentralized energy transformation from a system perspective? How could organizational models be designed and what business models arise in energy communities?

What are possible market designs for a 100% renewable energy transformation, integrating the heating and transportation sectors? Techno-economic modeling will be used to quantitatively assess those designs.

The project will enlarge policymakers’ toolbox for the analysis of energy markets to assess the value of decentralized small-scale production and flexibility, thereby making it highly policy-relevant.