Empowering Energy Communities: Three Methods To Distribute Savings In Local Energy Markets

In the current context of energy crisis, the energy sector is undergoing significant transformations towards a sustainable, competitive, and affordable energy landscape. Central to this transformation are Energy Communities (ECs), which have emerged as an ideal vehicle to facilitate the energy transition for small consumers. This paper evaluates the performance of three alternative methods (i.e. bill-sharing, price-based and surplus-based) to allocate costs and benefits within ECs. Specifically, we compare the distribution of savings generated by energy internal trading under each of the three allocation methods. The three allocation methods guarantee extracting the maximum economic surplus (i.e. savings) from the internal market, but one of them (bill-sharing) does not guarantee that participating in the internal trading is beneficial for every member. This is a major obstacle for its implementation since, frequently, some agents are worse off due to its participation in the community. The other two methods guarantee that participation is beneficial, but they differ in how savings are distributed. The distribution under price-based methods is influenced by the prices at which different members of the EC can buy and sell energy from the grid, while surplus-based methods distribute savings according to a criterion agreed by the EC members. Here we assume that they do it proportionally to the energy traded in the internal market. Keywords: energy communities, local energy market, allocation method