Campus Units

Economics, Electrical and Computer Engineering, Mathematics

Document Type

Article

Publication Version

Accepted Manuscript

Publication Date

2012

Journal or Book Title

IEEE Transactions on Power Systems

Volume

27

Issue

1

First Page or Article ID Number

251

Last Page

267

DOI

10.1109/TPWRS.2011.2162637

Abstract

Bilateral contracts are important risk-hedging instruments constituting a major component in the portfolios held by many electric power market participants. However, bilateral contract negotiation is a complicated process as it involves risk management, strategic bargaining, and multi-market participation. This study analyzes a financial bilateral contract negotiation process between a generation company and a load-serving entity in a wholesale electric power market with congestion managed by locational marginal pricing. Nash bargaining theory is used to model a Pareto-efficient settlement point. The model predicts negotiation outcomes under various conditions and identifies circumstances in which the two parties might fail to reach an agreement. Both analysis and simulation are used to gain insight regarding how these negotiation outcomes systematically vary in response to changes in the participants' risk preferences and price biases.

Comments

© 2012 IEEE. Personal use of this material is permitted. Permission from IEEE must be obtained for all other uses, in any current or future media, including reprinting/republishing this material for advertising or promotional purposes, creating new collective works, for resale or redistribution to servers or lists, or reuse of any copyrighted component of this work in other works. DOI: 10.1109/TPWRS.2011.2162637

Copyright Owner

IEEE

Language

en

File Format

application/pdf

Published Version

Share

COinS