A hybrid electricity pricing mechanism for joint system optimization and social acceptance within energy communities

Abstract

This article presents a framework for local electricity pricing mechanisms for households designed for social acceptance. The optimization goal of the mechanisms is to flatten the neighborhood electricity profile. The motivation and need for such mechanisms result from the expectation that the energy transition leads to high peaks in the distribution grid, both in electricity consumption and renewable generation, posing a significant challenge to these grids.Following the literature, quadratic cost functions have the potential to achieve the envisioned system optimization. However, their drawback is that consumers find the resulting pricing mechanisms too complicated and are generally not willing to participate in systems offering such prices. In contrast, the simpler pricing mechanisms currently used in practice are socially accepted. However, these mechanisms lack sufficient incentive to reduce electricity peaks in the distribution grids.Our approach is to combine these concepts in a hybrid pricing mechanism for local energy communities, using a piecewise linear cost function, that approximates a quadratic function. The resulting pricing mechanism is evaluated in a field test, and, based on the feedback of participating consumers and other criteria defined in literature, we can conclude that the proposed mechanism is socially accepted.In the implementation of this hybrid pricing mechanism, its performance can be improved such that it obtains results comparable to those of quadratic cost functions. Based on these findings, a detailed numerical evaluation, and the results from the field test, we conclude that the presented pricing mechanism has the potential for being used in practice.

Keywords

• Electricity pricing mechanism
• Load-dependent pricing
• Piecewise linear cost
• Social acceptance
• Peak shaving