Bilateral contracting in multi-agent electricity markets: Negotiation strategies and a case study

Electricity markets are systems for effecting the purchase and sale of electricity using supply and demand to set energy prices. Two major market models are often distinguished: pools and bilateral transactions. Pool prices tend to change quickly and variations are usually highly unpredictable. In this way, market participants can enter into bilateral contracts to hedge against pool price volatility. This article addresses the challenges of using software agents with negotiation competence to help manage the complexity of electricity markets, particularly the issues associated with the negotiation of bilateral contracts. Specifically, the purpose of this article is twofold: (i) to present the key features of a generic model for software agents that handles two-party and multi-issue negotiation, and (ii) to describe a case study on forward bilateral contracts.