Decentralized renewable energy integration in the urban energy markets: A system dynamics approach

The ongoing transformation in complex energy systems, driven by factors such as the adoption of renewable energy, higher-quality data, and the decentralization of power grids, presents a significant opportunity to tackle climate change and promote environmental justice. At the heart of this shift lies the move toward decentralized energy production, enabled by microgrids, prosumer engagement, and localized energy solutions. These efforts aim to reduce transmission losses, increase grid resilience, and give communities greater control over their energy futures. The transition is also reshaping the role of utilities, which are pivoting toward renewable energy sources and adapting to decentralized grid architectures while integrating these innovations into traditional systems. However, the policy, regulatory, and urban planning components of this transition have not been equally explored, and this gap must be addressed to provide successful implementation. In this research, we apply system dynamics modeling to assess multiple scenarios that explore different energy pathways, from traditional, utility-centered models to more planning-driven approaches that consider customer choices and decentralized solutions. Our findings underscore the need for a multi-pronged approach that combines policy innovation, socio-economic benefits, carbon reduction strategies, and extended customer engagement. We emphasize the importance of adaptable energy policies, and this research identifies several key pathways, including the adoption of renewable energy technologies, energy efficiency programs, and design strategies such as compact urban development, that reduce energy demand. By simulating scenarios, ranging from Business-As-Usual to the Illinois Climate and Equitable Jobs Act, we estimate the impact of policies on carbon emissions, electricity prices, and economic stability. The findings reveal the strong potential of decentralized systems, such as community microgrids and prosumer-driven energy solutions, in creating a more resilient and equitable energy system. With results, we highlight the need for continued research into public acceptance, technology, design, and policy tools that can further accelerate progress.