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Decentralized Local Pricing – Improving Network Usage in a Smart-Grid Environment under Limited Informationation


  • Jessica Raasch


  • Christoph Weber

    () (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen (Campus Essen))


With a smart grid environment, flexible load devices and provided local price incentives a more efficient grid usage may be achieved in the future. Bidirectional communication, smart devices and shiftable loads as electric vehicles and heat pumps have the potential to be coordinated with local supply when suitable incentives are provided. This can bring relief especially for distribution grid areas where infeeds from fluctuating renewable energy sources increase. This paper presents a decentralized local pricing mechanism, aiming at local prices that reflect the current load situation. That is in case of congestion a local price, deviating from the wholesale market price, is determined. With an iterative search algorithm suitable prices can be computed without gathering full-fledged bidding data. Simultaneously self-reinforcing effects are avoided. Further on this concept can be implemented rather easily precisely where and when required so that only areas with grid congestion are affected.

Suggested Citation

  • Jessica Raasch & Christoph Weber, 2017. "Decentralized Local Pricing – Improving Network Usage in a Smart-Grid Environment under Limited Informationation," EWL Working Papers 1704, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised May 2017.
  • Handle: RePEc:dui:wpaper:1704

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    References listed on IDEAS

    1. Neuhoff, Karsten & Barquin, Julian & Bialek, Janusz W. & Boyd, Rodney & Dent, Chris J. & Echavarren, Francisco & Grau, Thilo & von Hirschhausen, Christian & Hobbs, Benjamin F. & Kunz, Friedrich & Nabe, 2013. "Renewable electric energy integration: Quantifying the value of design of markets for international transmission capacity," Energy Economics, Elsevier, vol. 40(C), pages 760-772.
    2. Adriaan Weijde & Benjamin Hobbs, 2011. "Locational-based coupling of electricity markets: benefits from coordinating unit commitment and balancing markets," Journal of Regulatory Economics, Springer, vol. 39(3), pages 223-251, June.
    3. Schweppe, Fred C., 1988. "Management of a spot price based energy marketplace," Energy Policy, Elsevier, vol. 16(4), pages 359-368, August.
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    More about this item


    Smart Grid; Real-Time Pricing; Network Pricing; Agent-Based Modeling; Price-Elastic Behavior;

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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