Micro and Local Power Markets

Introduces readers to micro and local power markets and their use for local initiatives, grid integration, and future applications

This book provides the basis for understanding micro power markets, emphasizing its application for local initiatives, the grid integration of renewable-based generation, and facilitating the decarbonization of the future electrical networks. It gives readers a comprehensive overview of the market operation, and highlights the basis of the design of local and micro markets.

Micro and Local Power Markets starts by covering the economics and basic principle of power markets, including the fundamentals of the power trading (for both wholesale and local markets). Following a definition of both micro and local (technical and economic aspects) power markets, the book then looks at the organization of such markets. It describes the design of those power markets, isolated from the wholesale markets, and examines the methodologies of the interaction between these power markets and wholesale markets. The book also presents cognitive business models for micro and local power markets, as well as the regulatory issues concerning them.

• Introduces the basic principle of power markets

• Defines micro and local power markets

• Outlines the design of micro and local power markets, including the principles, as well as the trading schemes, flexibility, and services

• Discusses methodologies of the interaction between micro and local power markets and wholesale markets

• Presents business models for micro and local power markets

• Summarizes regulatory issues around micro and local power markets

Micro and Local Power Markets is an ideal book for upper undergraduate students in engineering, as well as for early researchers in the energy sector. It is also recommended for any scientist and engineer being introduced to the field of power systems and their organization.

Inhalt

List of Contributors xi

Foreword xiii

Preface xv

1 Power Market Fundamentals **1
*Íngrid Munné-Collado, Pol Olivella-Rosell and Andreas Sumper*

1.1 Introduction 1

1.2 Basic Design of Power Markets 5

1.2.1 Organization 5

1.2.1.1 Monopoly 5

1.2.1.2 Purchasing Agency 5

1.2.1.3 Wholesale Market 5

1.2.1.4 Retail Competition 7

1.2.2 Bilateral Contracts and Auctions 7

1.2.3 Clearing 10

1.2.4 Settlement or Pricing 10

1.2.5 Example 11

1.3 Mechanism for Auctions 13

1.3.1 Why Auctions in Energy Markets? 13

1.3.2 Auction Basics 13

1.3.2.1 The Revenue Equivalence Theorem 14

1.3.3 Types of Auctions 15

1.3.3.1 The English or Ascending-Bid Auction 15

1.3.3.2 The Dutch or Descending-Bid Auction 15

1.3.3.3 The First-Price Sealed-Bid Auction 15

1.3.3.4 The Second-Price Sealed-Bid Auction 16

1.3.4 Auction Mechanisms Applied to Electricity Products 16

1.3.4.1 Sealed-Bid Auctions 16

1.3.4.2 Descending Clock Auction 17

1.3.4.3 Hybrid Auctions 18

1.3.4.4 Combinatorial Auctions 19

1.3.4.5 Two-Sided Auction Mechanisms 19

1.3.5 Auction Characteristics in Power Markets 19

1.3.6 Auction Design 20

1.3.6.1 Objectives Establishment 20

1.3.6.2 Object Identification 20

1.3.6.3 Participation Encouragement 21

1.3.6.4 Vulnerabilities in the Auction Mechanism 21

1.3.7 Example 23

1.4 Markets for Futures, Energy, and Balancing 27

1.4.1 Forward and Futures Markets 27

1.4.2 Spot Markets 28

1.4.3 Day-Ahead Markets 29

1.4.4 Intraday Markets 30

1.4.5 Balancing Markets 32

1.5 Conclusions and Further Reading 33

References 34

2 Local and Micro Power Markets **37
*Íngrid Munné-Collado, Eduard Bullich-Massagué, Mònica Aragüés-Peñalba and Pol Olivella-Rosell*

2.1 Introduction 37

2.2 Why Local and Micro? 38

2.3 The Evolution of Power Systems 40

2.4 Introduction to Microgrids 41

2.4.1 Microgrid Definition 41

2.4.2 Microgrid Components 43

2.4.3 Microgrid Operation Modes 45

2.4.3.1 Microgrid Connected to an External Distribution Grid 45

2.4.3.2 Microgrid Connected to Another Microgrid 46

2.4.3.3 Isolated Microgrid 48

2.5 Local and Micro Power Market Concepts 49

2.5.1 Local and Micro Power Market Definitions 49

2.5.2 Comparative Analysis 52

2.6 Local Market Design 59

2.6.1 Involved Agents and Stakeholders 60

2.6.2 Approach 63

2.6.2.1 Centralized (Pool-based) Approach 64

2.6.2.2 Peer-To-Peer 66

2.6.3 Services 68

2.6.3.1 Energy 68

2.6.3.2 Flexibility 70

2.6.4 Local Market Services and Approach Review 77

2.6.5 Local Market Interaction 81

2.7 Conclusions and Discussion 84

References 85

3 Micro Markets in Microgrids **97
**Bernt Bremdal and Iliana Ilieva

3.1 Introduction 97

3.2 Basic Definitions of Micro Market Functions in Microgrids 99

3.2.1 Island Mode Versus Connected Mode 99

3.2.2 Market Approach for Resource Allocations 101

3.2.3 The Importance of Ownership, Business Focus, and Responsibilities 102

3.2.4 Capacity Design and Physical Laws 105

3.2.5 Resource Efficiency 105

3.2.6 Prerequisites for a Liberal Market 108

3.2.7 Basic Organizational Structures 109

3.2.8 Single SellerSingle Buyer 110

3.2.9 Multiple SellersSingle Buyer 110

3.2.10 Single SellerMultiple Buyers 112

3.2.11 Multiple SellersMultiple Buyers 112 3.3 Operational Characteristics of Microgrid-based Micro Market...