A wholesale electricity market framework with bilateral trading

Abstract

An agent-based simulation model for a hybrid power market structure is presented. A bilateral transaction mechanism is combined with a uniform-pricing auction settlement in order to isolate the impact of medium-term bilateral contracts on market power and spot prices in a competitive wholesale market setting. First we describe the negotiation method for bilateral trading of energy and then introduce a new approach for bidding in the DA market based on the load duration curve. We find that, despite the conventional concerns, the foreclosure ef- fect produced by the bilateral agreement between a generation and a retail business will not necessarily lead to higher prices, and will be manifested only according to the specific market characteristics.