Powering sustainability: Analyzing local energy market equilibrium with energy storage and renewable resources in oligopolistic grids

Financial constraints, economic risks, and uncertain investment returns have led to the emergence of new players and local energy markets (LEMs) in distribution networks. However, the limited energy transmission capabilities of distribution networks and their inability to accommodate numerous players create conditions conducive to oligopolies, potentially impacting the performance of LEMs. This paper proposes a day-ahead planning framework for LEMs to address the competitive environment within distribution networks hosting distributed energy resources (DERs). The research focuses on achieving equilibrium among oligopolistic entities, including the distribution system operator (DSO). Simulation results on a sample network with energy storage systems (ESSs), renewable energy sources (RESs), conventional distributed generation, and demand response resources reveal that despite limited capacity, these resources can exert market power, leading to price fluctuations and diminishing social welfare. Our findings suggest that regulators should encourage broader market participation rather than solely increasing renewable capacity to promote LEM sustainability and efficiency. Additionally, given the substantial disparity in profit distribution between monopolistic and competitive markets, regulators should consider implementing measures to protect intermediary players like energy storage systems, whose return on investment may be adversely affected by others' market power. This work provides valuable insights for policymakers involved in developing and regulating sustainable energy systems equipped with ESSs. • Novel day-ahead planning framework for LEMs addresses competitive DER environments. • Equilibrium among oligopolistic entities in distribution networks explored. • Limited-capacity DERs can exert market power, affecting prices and social welfare. • Insights for policymakers on sustainable energy system regulation provided. • Broader energy sector participation key to sustainable and efficient LEMs