Study on market mechanisms to promote local consumption of distributed renewable energy resources

Abstract

China's distributed renewable energy systems in rural area are facing challenges like reverse overload, power quality deviations, and limited grid access due to inadequate transformer capacity planning and high PV concentration in solar-rich areas. While transformer upgrades are fundamental, cost and timelines make market-driven flexibility solutions more viable. This study proposes three market mechanisms—Price-Driven-Response (PDR), Explicit-Response (ER), and Mixed-Response (MR)—to ordinate local power generation and consumption in rural areas in China. Simulations on a transformer court in China show that all three models effectively reduce reverse overload, with PDR model takes lower direct costs by avoiding third-party operators. However, insufficient user-side flexibility or "load migration" effects require complementary solutions like energy storage or expanded flexibility resources, since it is found that physical resource limitations cannot be fully offset by market mechanisms alone, necessitating integrated solutions. Key implementation recommendations include: targeting regions with high flexibility potential and intelligent electrification; prioritizing simpler PDR/ER models, advancing MR if needed; ensuring adjustable pricing/cost-sharing frameworks to balance equity and scarcity principles; scaling successful cases across grids while monitoring aggregated load migration impacts.