Risk evasion contract design for distribution utility based on incentives theory

Abstract

Distribution utilities are facing enormous risks in market environment. The causes of risks are analyzed and a risk-evasion contract design method is presented based on incentives theory and load management techniques. The contract design is to help the utility evade risks by encouraging customers' to actively apply load management behaviors. Principal-agent model is employed in risk-evasion incentive contract design. The utility's optimal contracts are developed with considering risk-averse and risk-taker customers respectively, the correlation of market price and retail price is also considered in contract design. The simulation results show the feasibility of proposed methods in evasion risks of spot market.