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.
Copyright Owner
IEEE
Copyright Date
2012
Language
en
File Format
application/pdf
Recommended Citation
Yu, Nanpeng; Tesfatsion, Leigh; and Liu, Chen-Ching, "Financial Bilateral Contract Negotiation in Wholesale Electricity Markets Using Nash Bargaining Theory" (2012). Economics Publications. 471.
https://lib.dr.iastate.edu/econ_las_pubs/471
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