Multi-agent Electricity Markets: A Case Study on Contracts for Difference

Abstract

Electricity markets (EMs) are a complex evolving reality -- new players and new business models are emerging and market rules are constantly changing. As EMs continue to evolve, there is a growing need for advanced modeling approaches that simulate the behavior of market participants, particularly how they may react to the economic, financial and regulatory changes that can occur in the environments in which they operate. This article presents several key features of software agents able to negotiate bilateral contracts in EMs, paying special attention to risk management, forward contracts and contracts for difference (CFDs). Also, it describes a set of case studies aiming at assessing the performance of CFDs as a risk management tool and comparing their performance to forward bilateral contracts.