4Q 2022

Local Energy Markets Can Expand Deployment of Renewables, Stabilize the Grid, and Increase ROI

A local energy market (LEM) is a geographically constrained, automated platform for trading electricity. The market platform is composed of physically proximate consumers and producers of electricity—prosumers—who trade and consume locally-produced energy from distributed energy resources (DER) using the existing distribution network.

An automated LEM platform facilitates trading—either peer-to-peer (P2P) or through third-party aggregators—between multiple buyers and sellers with the goal of balancing supply and demand in a particular part of the distribution grid. Additionally, the increased utilization of battery energy storage systems significantly reduces grid exports and imports. In turn, storage substantially reduces the number of transactions between the LEM and the distribution network, contributing to enhanced grid stability.

This report reviews LEM functionality and describes opportunities for using LEMs to provide greater grid flexibility, facilitate increased integration of DER, and help investors realize greater ROI.

Pages 15
Tables | Charts | Figures 6
  • What is a LEM?
  • How can LEMs help grids decarbonize and adapt to increased penetration of DER assets?
  • How can LEMs contribute to flexibility and allow more DER to enter retail and wholesale markets?
  • How can LEMs optimize distribution infrastructure and reduce phase imbalances and voltage instability?
  • Can LEMs maximize ROI for DER developers?
  • What are examples and case studies of LEMs?
  • How do DER affect grid stability and why may DER integration numbers be limited without proper accommodations?
  • What are problems distribution and network providers are facing with increased penetration of DER?
  • Energy providers
  • Renewable energy developers
  • LEM or peer-to-peer technology companies
  • Flexibility vendors
  • LEM project developers
  • Large industrial power users
  • Government agencies
  • Investor community
  • Consortiums
  • Academic institutions




How Local Energy Markets Work

Increased DER Integration Raises Significant Transmission and Distribution Challenges

At Greater Penetrations, Renewable DER Can Disrupt Normal Economic Dispatch, Causing a Net-load Duck Curve

Properly Designed, LEMs Can Help Solve the Duck Curve and Reduce Curtailment of Clean Energy

Permitting DR Trading Reduces Market-based Curtailment

Dynamic Phase Switching Stabilizes Distribution Networks and Reduces Congestion-based Curtailment

LEMs Produce Financial Benefits for Prosumers and Distribution Utilities

LEMs Offset Utility Expenditures on Grid Flexibility

LEMs Can Defer Network Capacity Upgrades

Case Studies of LEM Pilot Projects Provide Critical Lessons

USA: Brooklyn Microgrid

Germany: Pebbles Project

Netherlands: Hoog Dalem Stedin Pilot Project

UK: Cornwall Project

LEM Deployments Will Speed the Energy Transition, with Proper Guidance

  • DER Versus Centralized Generation Capacity, World Markets: 2022-2031
  • California Wholesale Energy Market Net-load Duck Curve
  • Typical All-India Demand vs. Net Peak-day Demand
  • DSO CAPEX Budgets: Example from Australian DSO with High DER Penetration
  • Simplified Schematic Demonstrating How a Typical LEM Works
  • Net Electricity Demand in the Netherlands by Month, 2016-2021
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