Risk Analysis of Transactive Energy Retail Markets

New grid management schemes have created exciting opportunities for end customers to maximize their utility by becoming active participants. In particular, Transactive Energy Systems (TES) allow customers to cooperate and negotiate in energy markets, increasing social welfare. These interactions also reduce demand-side uncertainties and simplify grid balancing at different levels. In TES, it is beneficial to employ forward contracts because they establish conditions for future energy supply, allowing grid maintainers to plan a cost-effective operation. Thus, end customers interact in local retail markets in advance to agree on service conditions that fulfill their needs. This paper presents a comprehensive analysis of the risks involved in those forward contracts with the aim of providing valuable information to participants. The TES environment modifies the typical risks of electricity contracts due to the information exchange in the negotiation and execution stages. Indeed, reliable data and realistic forecasting assumptions become a primary concern for each participant since they constitute the main threat of contract defaulting. Risk management strategies are presented in bow-tie and Ishikawa diagrams to elicit the decisions for market participants. Case study results demonstrate that forecasting errors impact the conditional value at risk of the contracts, in proportion to the demand uncertainty.