A game theoretic model for equilibrium pricing of futures electricity contracts

Due to the unique characteristics of electricity markets, the traditional methods to futures contracts pricing, which have been widely used to common commodity, can not be applied directly. This paper presents a Cournot game model for equilibrium pricing of futures electricity contracts. In the game, each Genco optimizes a generation asset allocation problem between monthly futures contracts and the daily spot market, with consideration of market power in futures market, price risk in spot market and operating costs and constraints of generating units. An iterative method is applied to obtain the Cournot-Nash equilibrium of the futures contract prices. Finally, the possible factors influencing the futures price equilibriums are discussed with case studies.