Optimal Alliance Strategies Among Retailers Under Energy Deviation Settlement Mechanism in China's Forward Electricity Market

Abstract

An energy deviation settlement (EDS) mechanism has been proposed to settle the deviation between consumption and energy contracts in China's forward electricity market. Due to high EDS costs of electricity retailers, a deviation mutual insurance (DMI) mechanism is put forward, representing an option for electricity retailers to reduce the deviation through contract transfer. Given this background, an optimal alliance strategy is proposed to maximize the utility of different types of individual electricity retailers. The alliance income model considers the EDS cost reduction and the cooperation cost analyzed based on transaction cost theory (TCT). An improved income allocation method, which considers distribution indexes selected by game theory and resource dependence theory (RDT), is proposed to ensure the comprehensive and reasonable allocation of alliance income. Considering the expected income and financial risk, an evaluation model using conditional value at risk (CVaR) as the financial risk assessment indicator is presented to measure the stability of alliances. Simulations based on data from a provincial electricity market in China illustrate that the EDS costs of retailers can be reduced by selecting appropriate partners for alliance. In addition, the proposed alliance income allocation method is more reasonable and more targeted than the cooperative game-based methods.