Long-Term Bilateral Contract Pricing with Risks of Congestion Charge

Abstract

The object of this paper is to study the risk of long- term bilateral contract in the deregulated power system. A model for long-term bilateral contract pricing with risks of congestion is presented. The negotiated income, variable fuel cost, investment depreciation, and congestion payment during the whole contract period are involved in this model. Based on the principle of no-arbitrage, the negotiated income is derived. The congestion payment is modeled as a random variable to take into account the fluctuation and uncertainties of load demand. For each operating scenario, the congestion charge is evaluated by AC OPF approach. A numerical method so-called 2n -concentration scheme is proposed to obtain the statistical characteristic of congestion charge instead of Monte Carlo simulation. Comparing with the Monte Carlo simulation, this method is less computation time consuming with acceptable numerical precision. Several numerical examples are given to illustrate the proposed method.