Impacts of a local electricity market operated by a local system operator: Minimize costs or maximize profits?

The local electricity market is a new mechanism to engage the participation of end-users as well as to ensure greater transparency of electricity markets. In order to simulate the workings of a local market, this paper introduces two mathematical models, geared at: i) minimizing expected costs or ii) maximizing expected profits. This model produces the quarterly energy profiles of local players for a whole day, i.e., 96 periods. Four types of players are considered in the local electricity market: PV producers, residential loads, flexible residential loads, and the Local System Operator (LSO). The two models provide energy profiles for these four players, which may differ depending on whether the LSO minimizes costs or maximizes profits of managing local resources. A case study addresses the analysis of the resulting profiles for residential loads, flexible residential loads, and local PV producers. The work concludes with a short discussion of the future role of the LSO and the implications of its operating philosophy on consumption levels, costs and revenues for local prosumers. © 2019 IEEE.