An auction mechanism for local energy markets: Results from theory and simulation

In this paper we develop an auction mechanism that is designed for a local energy market. It is aimed at enabling regional trading of ancillary services, but can also be used for administering negotiation processes in virtual power plants or microgrids. It takes into account that bidders are non-professionals and provides incentives for investments in distributed generation technologies. A wider spread of some of these technologies can help to save CO₂ emissions, whereas the other part can be used to counter the fluctuations of energy from renewable sources, such as wind and solar power, thereby supporting the energy turnaround. In order to test the performance of the proposed auction mechanism, a simple multi-agent-based simulation program has been developed. We find that the theoretical predictions hold in fact and competition quickly leads to price convergence.