LCOE-Based Pricing for DLT-Enabled Local Energy Trading Platforms

Abstract

Support schemes like the Feed-in-Tariff (FiT) have for many years been an important driver for the deployment of distributed energy resources, and the transition from consumerism to prosumerism. This democratization and decarbonization of the energy system has led to both challenges and opportunities for the system operators, paving the way for emerging concepts like local energy markets. The FiT approach has often been assumed as the lower economic bound for a prosumer’s willingness to participate in such markets but is now being phased out in several countries. In this paper, a new pricing mechanism based on the Levelized Cost of Electricity is proposed, with the intention of securing profitability for the prosumers, as well as creating a transparent and fair price for all market participants. The mechanism is designed to function on a Distributed Ledger Technology-based platform and is further set up from a holistic perspective, defining the market framework as interactions in a Cyber-Physical-Social-System. Schemes based on both fixed and variable contracts with the wholesale supplier are analyzed and compared with both the conventional FiT and to its proposed replacement options. The results show a cost reduction for the consumers and a slight loss in revenue for the prosumers compared to the FiT scheme. Comparing it to the actual suggested replacements to the FiT, however, it is clear that the pricing mechanism proposed in this study provides a substantial increase of benefits for both prosumers and consumers.