Tariff Design for Local Energy Communities Through Strategic Retail Pricing

Local energy markets (LEM) have recently attracted great interest as they enable effective coordination of small-scale distributed energy resources (DER) at the customer side and avoidance of distribution network reinforcements. However, the introduction of LEM has also significant implications on the strategic interactions between the customers and incumbent electricity suppliers. This paper explores these interactions by utilising a novel multi-period bi-level optimisation problem, which captures the pricing decisions of a strategic supplier and the response of energy communities (flexible consumers, microgenerators, energy storage systems) either individually or after being integrated through a LEM. Case studies are carried out to demonstrate the benefits of LEM in both physical and economic terms, while the effects on the tariff’s design are explored through the analysis of supplier’s pricing strategies.