Peer-to-peer and community-based markets: A comprehensive review (1810.09859v2)

Abstract: The advent of more proactive consumers, the so-called "prosumers", with production and storage capabilities, is empowering the consumers and bringing new opportunities and challenges to the operation of power systems in a market environment. Recently, a novel proposal for the design and operation of electricity markets has emerged: these so-called peer-to-peer (P2P) electricity markets conceptually allow the prosumers to directly share their electrical energy and investment. Such P2P markets rely on a consumer-centric and bottom-up perspective by giving the opportunity to consumers to freely choose the way they are to source their electric energy. A community can also be formed by prosumers who want to collaborate, or in terms of operational energy management. This paper contributes with an overview of these new P2P markets that starts with the motivation, challenges, market designs moving to the potential future developments in this field, providing recommendations while considering a test-case.

• The paper demonstrates that peer-to-peer markets empower prosumers by enabling direct energy trade and decentralized control.
• It compares full, community-based, and hybrid models to assess scalability, surplus sharing, and negotiation complexity.
• The study uses the IEEE 14-bus system as a test case to illustrate how hybrid models balance system-wide efficiency and flexibility.

Overview of Peer-to-Peer and Community-Based Electricity Markets

The paper "Peer-to-peer and community-based markets: A comprehensive review" presents an in-depth analysis of emerging P2P electricity markets. Authored by Tiago Sousa and colleagues, this work explores the transformative potential of consumer-centric market structures enabled by decentralization and advances in ICT, primarily focusing on the role of prosumers.

Emergence of Prosumers and P2P Markets

Prosumers, empowered by distributed energy resources (DERs) such as solar panels and storage systems, are both consumers and producers of energy. The paper highlights how the traditional top-down electricity market model struggles to accommodate these active participants. In response, peer-to-peer (P2P) electricity markets have been proposed, allowing prosumers to trade energy directly, thus decentralizing and democratizing market operations.

Market Structures

Three primary P2P market designs are outlined:

1. Full P2P Market: This design allows direct energy transactions between peers without central supervision. The paper notes that while this design maximizes consumer freedom, it faces scalability challenges due to the complexity of negotiations.
2. Community-Based Market: Managed by a community leader, this structure is more centralized within defined groups. It enhances cooperation among members but might not fully align with individual preferences.
3. Hybrid P2P Market: Combining elements of both previous designs, this approach offers scalability and flexibility by allowing interactions across multiple levels, such as between communities and individual peers.

Theoretical and Practical Implications

The proposed P2P models aim to empower consumers by aligning energy consumption with individual preferences, fostering resilience, and potentially postponing grid infrastructure investments. However, challenges such as ensuring optimal system-wide energy prices, negotiating and clearing mechanisms, and addressing regulatory barriers are highlighted.

A crucial discussion revolves around business models. The paper suggests that P2P markets could catalyze new B2C interactions, providing prosumers with more direct control over their energy sources. Moreover, grid operation must evolve to accommodate decentralized trading, potentially involving distributed optimization techniques to respect the privacy of individual market participants.

Test Case: IEEE 14-Bus System

The authors provide a benchmark test case using the IEEE 14-bus system, demonstrating the application of the different P2P designs. The full P2P model yielded the highest social welfare due to superior surplus sharing among peers. However, the results suggest that hybrid approaches may balance complexity and scalability effectively.

Future Directions

The paper advocates for ongoing research that includes integrating P2P markets with existing wholesale and retail structures, enhancing distributed optimization methods, and exploring the socio-economic aspects of consumer behavior in electricity markets. It calls for addressing human dimensions such as bounded rationality and strategic behavior, which could influence market dynamics.

Conclusion

This comprehensive review highlights the burgeoning potential of P2P and community-based electricity markets. By addressing the outlined challenges and leveraging opportunities, these market structures could redefine energy trading dynamics, aligning with the broader transition towards decentralized and consumer-centric energy systems.