A Decentralized Local Flexibility Market for Local Energy Communities to Mitigate Grid Congestion: A Case Study in Sweden

Abstract: This paper proposes a preventive congestion management framework with joint Local Flexibility Capacity Market (LFCM) and Local Energy Markets (LEMs). The framework enables Local Energy Communities (LECs) to optimize their flexibility potential across the LEM, LFCM, and heat markets. The LECs utilize their heat and electricity resources to offer flexibility services to Distribution System Operators (DSOs) for congestion relief. In this framework, energy and flexibility are treated as separate variables, each subject to different pricing scheme. Flexibility prices are market-driven, dynamically reflecting the location and severity of congestion. A case study conducted at Chalmers University of Technology, Sweden, shows that the proposed framework can effectively mitigate congestion by trading the LECs flexibility in the LFCM. The study also highlights up to 40% financial benefits for LECs, promoting the LFCM as a viable solution for congestion management in future decentralized energy systems.