Andreas Sumper, Dr., is a Full Professor in the Department of Electrical Engineering at the Escola Universitaria d'Enginyeria Tecnica Industrial de Barcelona (EUETIB), Universitat Politècnica de Catalunya, Spain. His research interests are renewable energy generation, digitalization of the power grid, micro- and smart grids, power system studies, and energy management. At the UPC he was actively leading the research in the European Horizon 2020 project EMPOWER H2020 on local power markets.

• List of Contributors xiForeword xiiiPreface xv1 Power Market Fundamentals 1Íngrid Munné-Collado, Pol Olivella-Rosell and Andreas Sumper1.1 Introduction 11.2 Basic Design of Power Markets 51.2.1 Organization 51.2.1.1 Monopoly 51.2.1.2 Purchasing Agency 51.2.1.3 Wholesale Market 51.2.1.4 Retail Competition 71.2.2 Bilateral Contracts and Auctions 71.2.3 Clearing 101.2.4 Settlement or Pricing 101.2.5 Example 111.3 Mechanism for Auctions 131.3.1 Why Auctions in Energy Markets? 131.3.2 Auction Basics 131.3.2.1 The Revenue Equivalence Theorem 141.3.3 Types of Auctions 151.3.3.1 The English or Ascending-Bid Auction 151.3.3.2 The Dutch or Descending-Bid Auction 151.3.3.3 The First-Price Sealed-Bid Auction 151.3.3.4 The Second-Price Sealed-Bid Auction 161.3.4 Auction Mechanisms Applied to Electricity Products 161.3.4.1 Sealed-Bid Auctions 161.3.4.2 Descending Clock Auction 171.3.4.3 Hybrid Auctions 181.3.4.4 Combinatorial Auctions 191.3.4.5 Two-Sided Auction Mechanisms 191.3.5 Auction Characteristics in Power Markets 191.3.6 Auction Design 201.3.6.1 Objectives Establishment 201.3.6.2 Object Identification 201.3.6.3 Participation Encouragement 211.3.6.4 Vulnerabilities in the Auction Mechanism 211.3.7 Example 231.4 Markets for Futures, Energy, and Balancing 271.4.1 Forward and Futures Markets 271.4.2 Spot Markets 281.4.3 Day-Ahead Markets 291.4.4 Intraday Markets 301.4.5 Balancing Markets 321.5 Conclusions and Further Reading 33References 342 Local and Micro Power Markets 37Íngrid Munné-Collado, Eduard Bullich-Massagué, Mònica Aragüés-Peñalba and Pol Olivella-Rosell2.1 Introduction 372.2 Why Local and Micro? 382.3 The Evolution of Power Systems 402.4 Introduction to Microgrids 412.4.1 Microgrid Definition 412.4.2 Microgrid Components 432.4.3 Microgrid Operation Modes 452.4.3.1 Microgrid Connected to an External Distribution Grid 452.4.3.2 Microgrid Connected to Another Microgrid 462.4.3.3 Isolated Microgrid 482.5 Local and Micro Power Market Concepts 492.5.1 Local and Micro Power Market Definitions 492.5.2 Comparative Analysis 522.6 Local Market Design 592.6.1 Involved Agents and Stakeholders 602.6.2 Approach 632.6.2.1 Centralized (Pool-based) Approach 642.6.2.2 Peer-To-Peer 662.6.3 Services 682.6.3.1 Energy 682.6.3.2 Flexibility 702.6.4 Local Market Services and Approach Review 772.6.5 Local Market Interaction 812.7 Conclusions and Discussion 84References 853 Micro Markets in Microgrids 97Bernt Bremdal and Iliana Ilieva3.1 Introduction 973.2 Basic Definitions of Micro Market Functions in Microgrids 993.2.1 Island Mode Versus Connected Mode 993.2.2 Market Approach for Resource Allocations 1013.2.3 The Importance of Ownership, Business Focus, and Responsibilities 1023.2.4 Capacity Design and Physical Laws 1053.2.5 Resource Efficiency 1053.2.6 Prerequisites for a Liberal Market 1083.2.7 Basic Organizational Structures 1093.2.8 Single Seller–Single Buyer 1103.2.9 Multiple Sellers–Single Buyer 1103.2.10 Single Seller–Multiple Buyers 1123.2.11 Multiple Sellers–Multiple Buyers 1123.3 Operational Characteristics of Microgrid-based Micro Markets 1133.3.1 Types of Microgrid 1143.3.2 Degree of Connectivity to Main Supply 1143.3.3 Geography 1193.3.4 Ownership 1203.3.5 Business Models 1203.3.6 Physical Control and Communication System 1213.3.7 Management of the Microgrid 1223.3.8 Number of Independent Buyers and Sellers 1233.3.9 Type of Supply 1233.3.10 Type of Loads 1243.3.11 Storage Capacity and Reserve Power 1243.3.12 Exchange and Trade Concepts 1253.3.13 Pricing and Settlement 1263.3.14 Contract Types 1273.3.15 Market Efficiency and Economic Welfare Considerations 1293.3.16 The Role of ICT 1293.4 Market Models 1303.4.1 Introduction 1303.4.2 Model 1: Central Control and Optimization 1303.4.3 Model 2: Central Control – Distributed Decision Making 1323.4.4 Model 3: Central Market Management and Double Auction 1363.4.5 Model 4: Distributed Control – Peer-to-Peer Trade 1423.4.6 Model 5: Non-competitive Allocation of Energy 1503.5 Conclusions 158References 1604 Coupled Local Power Markets 165Pol Olivella-Rosell, Shahab Shariat Torbaghan and Madeleine Gibescu4.1 Introduction 1654.2 Local and Wholesale Market Coupling 1674.2.1 Flexibility Definition 1694.2.2 Services and Products Traded 1714.2.3 Market Participants 1724.2.3.1 The Local Market Operator 1734.2.3.2 BRP and Local Markets 1754.2.3.3 DSO and Local Markets 1764.2.3.4 Prosumers and Local Markets 1764.2.4 LFM Interaction Timeline 1774.3 Local Market Clearing Mechanism in Coupled Markets 1784.3.1 Day-ahead Scheduling 1804.3.2 Intraday Scheduling 1834.3.3 Quarterly Scheduling 1864.4 Conclusions and Discussion 186References 1885 Digital Business Models for Local and Micro Power Markets 193Emmanuelle Reuter, Moritz Loock and Julia Cousse5.1 What are Digital Business Models? 1935.1.1 Digital Technology Enables Value and Money Flow to be Decoupled 1945.1.2 Prosumption as Co-creation 1945.2 Local Power Markets and Digital Business Models 1965.2.1 Decentralization and Local Power Markets 1965.2.2 Digitalization and the Rise of Platform Business Models 1995.2.3 Case Examples of Platform Business Models 2015.2.3.1 Case Example 1: Next Kraftwerke 2025.2.3.2 Case Example 2: LichtBlick 2025.2.3.3 Case Example 3: Piclo 2025.2.3.4 Case Example 4: Change38 2035.3 The EMPOWER Platform and Business Models 2045.4 Social Acceptance of Local Power Markets 2065.4.1 Citizen-level Acceptance 2075.4.1.1 Key Drivers for Participation 2085.4.1.2 Key Means for Participation 2095.4.1.3 Key Barriers for Participation 2125.4.2 Utility-Level Acceptance 2135.4.3 Cooperative-Level Acceptance 2155.5 Conclusion 219References 2206 Regulation of Micro and Local Power Markets 223Dirk Kuiken6.1 Power Market Regulation 2236.1.1 Definition: What and Why 2246.1.2 Development 2256.1.3 Regulators 2276.1.4 Forms, Instruments, and Types 2286.2 Common Power Market Regulation 2306.2.1 Generation (Production) 2316.2.2 Networks (Transportation and Distribution) 2326.2.3 Trade 2336.2.4 Consumption 2346.3 Regulation of Micro and Local Power Markets 2356.3.1 Definition 2376.3.2 Isolated vs Interconnected Markets 2386.3.2.1 Isolated Markets 2396.3.2.2 Interconnected Markets 2416.3.3 General Requirements 2426.3.4 Existing Legal Frameworks 2436.4 Trade Settings 2456.4.1 Bilateral Agreements 2456.4.1.1 Parties 2456.4.1.2 Services 2466.4.1.3 Terms and Conditions 2476.4.2 Market Platforms 2496.4.2.1 Market Operator 2496.4.2.2 Market Rules 2496.5 Further Discussion 253Acknowledgements 254References 255Index 261