Bilateral Contracting and Price-Based Demand Response in Multi-Agent Electricity Markets: A Study on Time-of-Use Tariffs

Hugo Algarvio () and Fernando Lopes
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Hugo Algarvio: LNEG–National Laboratory of Energy and Geology, Est. Paço Lumiar 22, 1649-038 Lisbon, Portugal
Fernando Lopes: LNEG–National Laboratory of Energy and Geology, Est. Paço Lumiar 22, 1649-038 Lisbon, Portugal

Energies, 2023, vol. 16, issue 2, 1-17

Abstract: Electrical energy can be traded in liberalized organized markets or by negotiating private bilateral contracts. Competitive markets are central systems where market players can purchase and sell electrical energy. Bilateral contracting consists typically in a private negotiation of power over several months or years between two parties. Price-based demand response considers the active participation of consumers in electricity markets. Consumers adopt demand response programs when responding to market prices or tariffs, as they change over time. Those tariffs can be proposed by retailers by considering their load shape goals, influencing consumers to change their behavior. Consumers may adopt strategies from two different groups, namely by curtailing energy at times of high prices (e.g., peak and intermediate periods) and rescheduling energy away from those times to other times (shifting). This article considers bilateral contracting in electricity markets with demand response. It investigates how curtailment and shifting affect the energy quantity and energy cost of consumers that adopt a time-of-use tariff involving three block periods (i.e., base, intermediate and peak periods). The results indicate that consumers respond to changes in energy price according to their consumption flexibility, while retailers do not always change energy price in response to consumers’ efforts to change their consumption patterns. On average, by considering a 5% consumption reduction in the intermediate and peak periods by a consumer agent, a retailer agent reduces the energy price only by 1.5%.

Keywords: electricity markets; bilateral contracting; demand response; load response strategies; time-of-use tariffs (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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