Risk Assessment of Local Forward Markets in a Transactive Energy System

Transactive Energy systems (TES) have brought about the opportunity to design new energy markets and empower end customers to participate in grid balancing mechanisms. Consequently, the TES paradigm reduces demand uncertainties allowing better management of generation resources. One of the most advantageous configurations for the TES is the forward local energy markets which give information in advance to plan a secure and cost-effective operation of power systems. These markets depend on the capacity of the participants to fulfill their agreements. Thus, it is crucial to assess the reliability of the forward contracts and then identify the economic and technical risks for both the sellers (i.e., retailers and generators) and the customers under these specific market conditions. This paper presents bow-tie and event tree diagrams as valuable tools for eliciting the risks and proposing assurance schemes that keep reliable energy services at affordable prices. Furthermore, the demand and generation forecast errors are assessed since they constitute the main risk of defaulting on forward energy contracts. Case study results show the impact of the market share on risk allocation.