Local Energy Systems and Markets

Improved Coordination of Decentralized Markets

More and more electricity in Germany is being generated emission-free and decentralized from renewable energies, primarily through wind power and photovoltaic plants. In transport and buildings, electric vehicles and heat pumps are helping to reduce CO2 emissions. Both developments are mostly of decentralized nature, so bottlenecks can arise in the distribution grids, particularly if too many devices draw electricity from the grid at the same time.

Additionally, demand is changing. Concerning electricity consumption, people are becoming more sensitive to how they are supplied with energy: For example, some prefer locally and green-generated electricity, which results in increasing demand for this type.

The transformation of the electricity sector from a few largescale power plants to many small, decentralized units, which are often both generators and consumers, must be coordinated in a targeted manner. Local mechanisms can be used for this purpose. They could also be used to exploit flexibility potential at the distribution grid level. The exploitation of local mechanisms would mean that it is easier to control how and when electricity is generated and consumed. This control is vital to reduce peak loads, i.e., prevent a lot of electricity from being required simultaneously. 

Overall, it is essential to understand these structures through sound economic analyses to accompany and shape this transformation process.

EWI contributes to understanding the new decentralized supply structures.

  • Economic benefits of virtual power plants (VPPs), community solutions, or microgrids
  • Analysis of peer-to-peer trading and energy platforms
  • Decentralized energy systems under the current regulation
  • Cost-optimal technology penetration
  • Coordination mechanisms for the deployment of flexibilities
  • How decentralized structures affect the overall system
  • Intelligent control algorithms for decentralized energy systems
  • Coordination in the distribution grid

How Decentralized Energy Systems Work …

How do virtual power plants differ from community solutions or microgrids? What happens in peer-to-peer trading – i.e., trading electricity with “like-minded” neighbors – or on energy platforms? The EWI analyzes and evaluates the numerous concepts and ideas surrounding decentralized energy systems using economic methods. The focus is always on the economic benefit and the efficient further development of the current energy system.

For this purpose, the EWI evaluates the current regulation and its suitability for a decentralized energy system. Adjustments and new concepts are analytically processed and put in relation to the status quo. Thus, the EWI creates an understanding of the important core aspects of transforming a centralized into a decentralized energy system.

… How to Model Them …

The EWI quantifies the developments of decentralized energy systems on the basis of numerical models. In various research projects, especially the building, transport, and electricity sectors are modeled, and different market structures are simulated. Thereby, the EWI answers questions about the cost-optimal technology penetration, suitable coordination mechanisms for flexibilities, or the effects of decentralized structures on the overall system.

The EWI builds on many years of experience with economic energy system modeling and a pool of mature models: COMODO is used to model households’ technology investments; EASE is used to simulate the operation of virtual area power plants.

… and What New methods for Their Coordination Look Like

In addition to traditional ones, the EWI is also further developing algorithmic methods. As such, intelligent control algorithms for decentralized energy systems are tested, for example, based on machine learning.

In particular, the EWI investigates how a variety of actors in a decentralized energy system can be coordinated and how their preferences can be captured. In this way, the EWI also contributes to the implementation of high-resolution coordination in the distribution grid.