Electricity market: Successful practical test in the Euskirchen area shows the opportunities and challenges of local electricity trading

12 November 2024 | As part of the BEST project, a consortium led by the Reiner Lemoine Institute (RLI) has tested local electricity trading in the Euskirchen area on a digital marketplace. The results show opportunities and challenges: Local electricity markets help energy suppliers to coordinate supply and demand locally and optimise products. Private households or small and medium-sized enterprises (SMEs) could utilise the flexibility of their electrical systems and applications to reduce electricity procurement costs. As challenges, the experts point out how important the rollout of smart metering systems is for successful local electricity trading and that simply passing on electricity prices leads to high simultaneities that can overload grids.

‘Local electricity trading is technically possible. Our results show how local flexibility can be used via a decentralised electricity market. Electricity can be traded freely as long as the grids have sufficient capacity. In the event of bottlenecks, regional flexibilities can be utilised in a targeted manner. This enables us to meet electricity demand as locally as possible, avoid curtailment and counteract bottlenecks,’ says Friederike Reisch, Head of the Research Unit Mobility with Renewable Energy at RLI.

Practical test with blockchain technology
The practical test included commercial, municipal and private locations that were equipped with the necessary hardware and software, such as home energy management systems (HEMS) and smart metering systems for electricity trading. For this trading, the project team set up a market secured by blockchain technology with authentication and security architecture. This ensured a transparent market and data protection at the same time. From weather forecasting and local optimisation of electricity trading to the procurement of balancing energy, the project team implemented all the necessary energy management processes and gained important insights into local electricity trading:

1. IT-side connection and standardisation are complex
   The connection of heterogeneous existing systems, such as machines in production plants or older PV systems, turned out to be complex and cost-intensive. There is currently no scalable process for efficiently utilising the flexibility potential of existing systems at SMEs. Standardised metering concepts and the rollout of smart metering systems with control capability could bring decisive progress here.
2. challenge of grid overload with dynamic electricity prices
   The effects of the increasing electrification of mobility and the heating sector on a local market were simulated.The results show that the mere passing on of (exchange) electricity prices can lead to high simultaneity in consumption and thus to grid congestion in the future.The regulations on variable grid charges adopted with the amendment to Section 14a of the Energy Industry Act could provide a remedy here, but must be able to be differentiated in terms of time and space.
3. local electricity markets as a forward-looking solution for grid operators
   Local electricity markets offer a transparent and potentially scalable solution for local energy suppliers to coordinate local supply and demand. On this basis, new products can be developed that are optimally suited to the generation and consumption structure of the players in the respective regions.
4. households and SMEs can reduce electricity procurement costs
   Participation in local electricity markets enables households and SMEs to utilise the flexibility of their electrical systems to reduce their electricity procurement costs without external intervention in their internal processes.

Integration of renewable energies and flexibilisation of electricity consumption

Whether photovoltaics on the production hall, municipal wind turbines or rooftop solar on your own home – the energy transition is progressing and electricity generation is becoming more decentralised.

The addition of these systems also increases the proportion of volatile renewable energies in the electricity system and brings new challenges, such as the cost of interventions to adjust the power feed-in (redispatch measures).The successful integration of renewable energies and the flexibilisation of electricity consumption are therefore key elements of the energy transition. ‘Previous electricity grids were treated as a ‘copper plate’ – a model that is increasingly reaching its limits. The project results show a pioneering approach to overcoming the challenges of the energy transition and offer insights for applications in the area of local electricity markets,’ says Reisch.

About the project and the practical test
In the BEST project (blockchain-based decentralised energy market design and management structures), experts developed and tested an electricity market bidding system (SMBS) based on a blockchain and as open source software, taking into account the current regulatory framework. The aim was to develop a decentralised electricity market design that takes into account regional grid bottlenecks and enables the use of flexibility potential. A central component of the project was the implementation of a blockchain-based market structure supported by a robust authentication and security architecture.In close cooperation with the regional energy supply company e-regio, a trading mechanism was developed and successfully tested in a prototype in which real consumption and generation locations were integrated into the process. RLI worked on the project together with experts from the Fraunhofer Institute for Open Communication Systems (FOKUS), the digital company OLI Systems, the research institute fortiss, Weserbergland University of Applied Sciences, the energy service provider e-regio and Energieforen Leipzig für Wissenstransfer in der Energiewirtschaft. The project ran between January 2021 and September 2024 and was funded by the Federal Ministry for Economic Affairs and Climate Protection.

Further information: https://best-strommarkt.de/