Source-linked AI summary
Peer-to-peer and community-based markets: A comprehensive review
Tiago Sousa, Tiago Soares, Pierre Pinson, Fabio Moret, Thomas Baroche, Etienne Sorin
TL;DR
Electricity markets remain largely hierarchical even as prosumers manage distributed production, consumption, and storage. The paper provides a comprehensive review of consumer-centric P2P market designs and their enabling technologies. It concludes that P2P markets can coexist with existing structures if conflicts with historical actors are prevented, while scalability and ICT constraints remain.
Problem
Electricity markets still use hierarchical, top-down allocation and pricing despite the evolution toward decentralized power-system management.
Method
The paper reviews P2P market proposals, community and hybrid designs, optimization approaches, enabling ICT, opportunities, challenges, and future research directions.
Results
P2P markets can offer consumer choice, new business models, increased resilience and security, and opportunities to defer grid investments.
Takeaways & Limitations
P2P markets may coexist with existing wholesale and retail structures, with future work needed on market coupling and transitions between markets.
Takeaways & Limitations
Negotiation scalability and ICT constraints, including blockchain scalability and data storage, remain unresolved challenges for broad deployment.
Abstract
from arXiv · showhide
The advent of more proactive consumers, the so-called "prosumers", with production and storage capabilities, is empowering the consumers and bringing new opportunities and challenges to the operation of power systems in a market environment. Recently, a novel proposal for the design and operation of electricity markets has emerged: these so-called peer-to-peer (P2P) electricity markets conceptually allow the prosumers to directly share their electrical energy and investment. Such P2P markets rely on a consumer-centric and bottom-up perspective by giving the opportunity to consumers to freely choose the way they are to source their electric energy. A community can also be formed by prosumers who want to collaborate, or in terms of operational energy management. This paper contributes with an overview of these new P2P markets that starts with the motivation, challenges, market designs moving to the potential future developments in this field, providing recommendations while considering a test-case.
1. Introduction
The paper motivates consumer-centric electricity markets as a bottom-up alternative to hierarchical electricity-market management, enabled by prosumers, collaborative principles, and P2P or community-based structures.
- Distributed energy resources and ICT are transforming passive consumers into prosumers who manage consumption, production, and storage.
- Collaborative economy principles promote shared resources and cooperative infrastructures rather than individually optimized outcomes.
- Existing electricity markets retain hierarchical, top-down resource allocation and pricing despite increasingly decentralized power-system management.
- A bottom-up market approach can empower prosumers and reflect preferences such as renewable type, CO2 emissions, and localized energy.
- Consumer-centric electricity markets rely on decentralized P2P and community-based structures in which peers cooperate to produce, trade, or distribute goods or services.
- The paper reviews these markets comprehensively, covering their emergence, market structures, optimization techniques, opportunities, challenges, and future developments.
2. Premises leading towards peer-to-peer markets
P2P markets build on bilateral contracts, microgrids, and ICT-enabled projects that support decentralized energy exchange, local control, and emerging business models.
- Bilateral contracts and microgrids: Bilateral contracts establish direct buyer–seller agreements for exchanging electric energy, generation capacity rights, or related products at agreed prices.
- Bilateral contracts and microgrids: Multi-bilateral trading provides a premise for P2P markets, whose simplest form consists of agreements among multiple agents.
- Bilateral contracts and microgrids: Microgrids are low-voltage distribution grids containing distributed energy resources that operate either islanded or grid-connected.
- Research projects and companies: R&D projects pursue both P2P market designs and business models, and local control and ICT platforms for prosumers and microgrids.
- Research projects and companies: EMPOWER developed a cloud-based real-time platform for metering and trading within a local community, while P2P-SmartTest explores distributed control on distribution grids.
- Research projects and companies: Projects and start-ups address wholesale-market integration, blockchain-based trading, local energy communities, surplus exchange, and matching consumers with local renewable generation.
3. Designs for peer-to-peer markets
The literature identifies full P2P, community-based, and hybrid market designs, distinguished by their decentralization and trading topology. These designs range from direct bilateral negotiation to structured community management and layered coordination.
- Three P2P market structures are identified: full P2P, community-based, and hybrid designs, distinguished by their degree of decentralization and topology.
- Full P2P market: Full P2P markets let peers negotiate energy trades directly, with bilateral transactions, peer preferences, and decentralized optimization supporting privacy-preserving coordination.Agents share only the power and price they are willing to trade, while trades can reflect preferences such as local or green energy.
- Community-based market: A community-based market uses a community manager to coordinate internal trading and mediate exchanges with the wider system.Members trade within the community without knowing the counterparty, while imports and exports are centrally aggregated.
- Hybrid P2P market: Hybrid P2P markets combine direct peer interactions with community-based layers, forming a “Russian doll” structure that requires coordination across levels.This design combines the two previous structures and allows communities and individual peers to interact directly.
- Comparison of market designs: Full P2P markets align energy use with consumer preferences but face scalability challenges as negotiations and communications grow with participation.Sparse graphs are suggested as one possible way to reduce communication requirements.
- Comparison of market designs: Community-based markets can increase member involvement and cooperation, while hybrid designs reduce ICT and computational requirements relative to full P2P markets.Community managers may provide grid services as aggregators, whereas hybrid structures require coordination between and within levels.
- Infrastructure: Blockchain is considered a potential virtual-layer technology for P2P markets, but scalability and data-storage issues remain, and P2P markets can operate without it.
4. Opportunities and challenges
P2P markets offer consumer choice, transparency, resilience, new business opportunities, and possible grid-investment deferral, but face legal, engagement, pricing, transaction, and grid-operation challenges. The paper uses SWOT analysis to organize these opportunities and obstacles and discusses future research and business-model directions.
- Analytical approach: SWOT analysis organizes the main enablers and obstacles shaping P2P market potential.The analysis is presented in Table 3 and supports discussion of future prospects, opportunities, and remaining challenges.
- Strengths: P2P markets can empower consumer choice and transparency by allowing dynamic selection of electricity type and origin.Product differentiation lets consumers express preferences such as local or renewable energy, although transactions may receive different prices.
- Strengths and opportunities: Collaborative participation may improve resilience and security by helping peers address renewable-production losses and grid-congestion problems.This could support a shift from hierarchical grid operation toward problem solving involving large producers and small prosumers.
- Weaknesses: P2P designs may produce sub-optimal overall prices, overwhelming transaction volumes, heavy negotiations, and hardware life-cycle concerns.Community-based and hybrid designs may mitigate transaction-related weaknesses, while further investigation is needed on the magnitude of price sub-optimization.
- Opportunities: P2P markets may democratize energy, create new business models, increase retail competition, and defer some grid investments.The paper also considers extending P2P from small-scale consumer-to-consumer applications toward business-to-consumer models involving utilities and prosumers.
- Threats and challenges: Legal restrictions, energy poverty, limited consumer engagement, bounded rationality, poor design, and unresolved grid-congestion risks constrain P2P deployment.Grid-operation impacts remain insufficiently studied, while most countries still prohibit direct exchanges between prosumers.
5. Reference test case for P2P markets
The paper presents a reproducible IEEE 14-bus test case for comparing full P2P, community, and hybrid P2P market designs. In the simulations, full P2P achieves the highest social welfare, while transaction costs and network constraints qualify the comparison.
- Test-case setup: The test case uses an IEEE 14-bus network divided into three communities containing 19 peers.Bus 1 connects the system to the main grid through an infinite-power generator.
- Test-case setup: The one-year simulation uses 30-minute steps and Australian data for wind, photovoltaic production, household consumption, and market prices.Resource and load data are normalized and scaled to system capacities.
- Market designs: The community design trades only with the main grid, whereas hybrid P2P allows communities to trade with one another and the grid.The three designs are solved using centralized optimization, with transaction costs included in the formulations.
- Simulation results: Full P2P reaches the highest social welfare, while the community design is lowest, with a difference of around 2%.Full P2P can share renewable surplus among all peers, whereas communities trade only with the main grid.
- Simulation results: Hybrid P2P improves social welfare over the community design, but a 17.4k$ intercommunity transaction cost prevents parity with full P2P.When this cost is removed, hybrid P2P social welfare is similar to full P2P.
- Simulation results: Full P2P reduces energy import and export by 95% and 5%, respectively, compared with the community design, while intercommunity exchange reaches 54.4 GWh.The authors caution that results may change when network constraints are included.
6. Conclusions and perspectives
The paper concludes that P2P markets have potential to integrate prosumers and coexist with existing electricity markets. It identifies hybrid P2P as scalable while emphasizing transition conflicts, reliability, communication, and consumer-behavior challenges.
- Conclusions: P2P markets may bring prosumers into power-system operational practice, provided conflicts with historical actors are prevented during the transition.The paper frames coexistence with existing market structures as conditional on a smooth and manageable transition.
- Future perspectives: Future research should couple P2P markets with wholesale and retail markets so consumers can switch between them when convenient.This recommendation concerns integration with existing market structures.
- Future perspectives: P2P markets may support electricity B2C business models with greater regard for consumer preferences and interests.The paper calls for further work quantifying the benefits and impacts of these models.
- Future perspectives: Hybrid P2P is identified as the most suitable design for scalability, while large peer populations remain a challenge for communication and negotiation.Suggested directions include graph sparsification, asynchronous communication, and improved negotiation processes.
- Future perspectives: Future research should model bounded rationality and strategic consumer behavior and address reliability through distributed reserves and collaborative imbalance management.The authors mention probabilistic matching and queueing theory as examples for solving prosumer imbalances.
Appendix A. Review methodology
The review uses a broad interdisciplinary literature search followed by relevance assessment and category-based classification. Of 112 publications initially gathered, 80 remained highly relevant, with publication activity increasing sharply after 2015.
- Search and selection: The authors gathered technical reports, scientific papers, and books across energy, power systems, economics, operations research, computer, and social sciences.Only peer-reviewed journal articles, books, and conference proceedings in English were analyzed.
- Search and selection: The search identified 112 publications, which were assessed for relevance and assigned to one or more predefined research categories.Three labels were used to quantify relevance within each category.
- Results: 80 publications remained highly relevant, comprising 69 label-A and 11 label-B references.The retained set forms the basis for the review's focused synthesis.
- Results: Among label-A references, 15 P2P-market publications appeared by 2015, compared with nearly 54 published after 2015.The authors interpret this distribution as increased scientific and industrial interest in P2P electricity markets.