Multi-agent retail energy markets: Bilateral contracting and coalitions of end-use customers

The electricity industry has undergone enormous changes and market forces drive now the price of energy. This paper focuses on retail markets in which end-use customers can choose their supplier from competing electricity retailers. Most retailers negotiate the terms and conditions of electricity contracts directly with end-use customers, although they often oversimplify or ignore classical pricing policies encouraging discounts on quantity. This work aims at using autonomous software agents to help manage the complexity of retail markets. A particular end-use customer agent can negotiate a forward contract directly with a single retailer agent. More importantly, two or more end-use customers can ally into coalitions to strengthen their bargaining positions and negotiate better agreements. This paper presents several key features of software agents able to ally into coalitions and negotiate the terms and conditions of forward contracts. It also describes a case study involving a retailer agent and a coalition of three large industrial customers negotiating a three-rate tariff. The results indicate that coalition formation is beneficial to end-use customers - that is, the price agreed in the forward contract is more favorable to these agents.