The energy system decarbonization leads to a decentralization of generation and flexibility. Among the new concepts to integrate the distributed flexibility are local energy markets. While a broad range of research investigates local energy markets on a distribution grid level in detail, research on their system impact has been limited. Therefore, we develop a framework to investigate different configurations of local markets and operation of distributed energy resources and their interaction with the wholesale markets. This framework is applied to a pan-European case study with detailed bottom-up modeling of local energy markets in France and Germany. Additionally, transmission grid simulations are carried out to investigate the impact of local trading on grid congestions. Our results show that a direct coordination of distributed flexibility within the wholesale market is more efficient than a preference of local trading. Nonetheless, local energy markets can be used as an incentive for expansion of distributed flexibility as well as a way to break down the complexity of coordinating millions of distributed assets in a single market. Additionally, our results show that local trading relieves the transmission grid.

The energy system decarbonization and decentralization require coordination schemes for distributed generators and flexibilities. One coordination approach is local energy markets for trading energy among local producers and consumers. The resulting local coordination leads to the questions of how the interaction between local and wholesale markets will be designed and of how the introduction of local energy markets influences the wholesale market system. Therefore, this paper proposes a bottom-up modeling method for local markets within a pan- European wholesale market model. Furthermore, an aggregation-disaggregation method for local markets is developed to reduce computational effort. A case study for local markets in Germany shows the computational advantages of the aggregation-disaggregation method. Preliminary results indicate the impact of different interaction designs between local and wholesale markets on the wholesale market and show the need for further research.