The Research Of Risk Management In Electricity Markets

Participants of an electricity market are encountering unprecedented market risk as power industry reform. In order to hedge risk and improve efficiency of market operating, a risk management method is proposed in this paper. bilateral contracts and future contracts are introduced into power market as an efficient risk-managing tool. Although a majority of electricity transaction is conducted through bilateral contracts and future contracts, its research is far not enough until the failure of Californian electricity market. Base on bilateral contracts and future contract, basic style, pricing theory and risk management are introduced in this paper.Base on evaluating, The VaR(value at risk) model and analytical approach-Delta model application in the financial risk evaluate model at electricity market is introduced first, then a forward contact model including deposit between power suppliers and power companies is proposed in this paper. We calculate the risk of power supplies according to VaR method. Forward contacts deposit is acquired based on the proposed model. Variant of deposit is calculated on the basis of different contact prices and confidence level. The calculation results show that deposit decreases as contract price decreases and increases as confidence level increases. The results also show that the VaR method is useful to evaluate market risk, so it provides a new way of evaluate for power market.As an apply of risk management, this paper considers the problem of energy allocation of electricity purchaser, specific analyzes the problem of energy allocation between spot market and contract market. Under the condition of maximal electricity purchaser's utility, different optimal energy allocation methods are given on the basis of different electricity markets by using electricity purchaser's utility function. The research results show that the energy allocation proportion in the contract market has something to do with the spot market price profit and risk; future transaction reduces the risk of spot market; transmission rights hedges the risk of contract market on the term of congestion. This method illustrates risk management can hedge risk and reduce purchaser's cost, so it explains the necessity and effect of risk management in power market.