A Literature Review on Bilateral Contracts in Electricity Markets; Perspectives and Challenges

Amiri, Mohammad Mehdi; Heydarizadeh, Mohammad; Zarifi, Reza; Bagheri, Hamid Reza

doi:10.48308/ijrtei.2024.235791.1047

A Literature Review on Bilateral Contracts in Electricity Markets; Perspectives and Challenges

Document Type : Review Article

Authors

Mohammad Mehdi Amiri ¹

Mohammad Heydarizadeh ²

Reza Zarifi ²

Hamid Reza Bagheri ²

¹ Electrical Networks Research Institute (ENRI),Tehran, Iran

² Iran Grid Management Company (IGMC), Tehran, Iran

10.48308/ijrtei.2024.235791.1047

Abstract

Academics and practitioners are becoming increasingly interested in the role and function of bilateral contracts in the complex and ever-evolving landscape of electricity markets. Bilateral contracts in the electricity sector involve two parties trading goods and services between themselves, which is accompanied by a unique set of advantages and challenges. A significant portion of energy transactions are governed by this distinctive form of contract, which serves as a mechanism for hedging against price volatility, ensuring supply security, as well as facilitating market stability. Here, we provide a comprehensive analysis of the state-of-the-art research and developments in bilateral contracts in the electricity market. In this paper, we discuss the importance of bilateral contracts in the future of electricity markets, how these contracts can be evaluated, how they contribute to market stability, and the challenges and perspectives associated with them. The purpose of this paper is to review new studies related to bilateral contracts, as well as to analyze and review the models used in these contracts. By emphasizing the technical, economic, and regulatory aspects of such contracts, this paper aims to direct researchers, policymakers, and participants toward effective decision-making.

Keywords

Bilateral contract

Electricity market

Offering strategy

Risk management

Market power

Market efficiency

Subjects