Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 372: Market Design for Trading Commoditized Renewable Energy

Almas Heshmati () and Shahrouz Abolhosseini ()
Additional contact information
Almas Heshmati: Centre of Excellence for Science and Innovation Studies (CESIS), and Jönköping University (JIBS), Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Shahrouz Abolhosseini: College of Engineering, TEMEP, Seoul National University, Seoul, Korea

Abstract: Information and communication technology plays an important role in achieving a higher level of energy efficiency. In particular, energy efficiency can be achieved by integrating information technology into electricity networks to enable the interaction between suppliers and customers (smart grids). Power generation by renewable energy sources can also benefit from this integration of technologies. Distributed power generation, which will be the basis of renewable energy production, encourages the production of renewable energy resources and, accordingly, decreases transmission loss, increases energy saving, and enhances energy efficiency. Therefore, integrating distributed, renewable energy sources and smart grids within local marketplaces for trading renewable energy in small units can be a promising combination. In this paper, we propose a structure of a marketplace for renewable energy sources, design a market mechanism for trading in this market, and outline the requirements for such a market to function efficiently. Finally, we conclude and present recommendations to policymakers to provide incentives to generators to increase deployment of renewable energy sources and to end users to save electricity and to consume clean energy.

Keywords: Market design; market mechanism; trading energy; renewable energy; clean energy; energy policy

JEL-codes: D40; H44; L11; L49; Q13; Q27; Q42

19 pages, August 25, 2014

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