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Local Energy Markets

Referierte Aufsätze Web of Science

Pio Baake, Sebastian Schwenen, Christian von Hirschhausen

In: The Journal of Industrial Economics 71 (2023), 3, S. 855-882


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.

Pio Baake

Research Director Regulation in the Firms and Markets Department