08.06.2022: Forthcoming publication on local energy markets

Research, Aktuelles |

Sebastian Schwenen's paper titled "Local Energy Markets" with Pio Baake and Christian von Hirschhausen is forthcoming in Journal of Industrial Economics

We congratulate Sebastian Schwenen, Pio Baake and Christian von Hirschhausen to their forthcoming paper "Local Energy Markets". Read the full paper here.  

In current power markets, the bulk of electricity is sold wholesale and transported to consumers via long-distance transmission lines. Recently, decentralized local energy markets have evolved, often as isolated networks based on solar generation. We analyze strategic pricing, investment, and welfare in local energy markets. We show that local energy markets yield competitive equilibrium prices and provide efficient investment incentives. Yet, we find that strategic behavior leads to allocative inefficiency. We propose a clearing mechanism that induces truth-telling behavior and restores first- best welfare.