Risk Control in Electricity Market Based on Margin Requirement

During market activities, participants in electricity market may suffer from risks like price risk and bear great losses, which will eventually lead to a higher possibility of default in market transactions. Thus, for the market operator, it is essential to implement risk control on market transactions. A risk control mechanism based on margin requirement is proposed in this paper, which aims to minimize the adverse effect of these risk events. The risk of participants in long-term and spot transactions are assessed based on different theories, that is, the risks of long-term transactions are limited by the daily price limit, and the risk of spot transactions should include the whole settlement process. Then, the margin requirements are calculated based on these risk assessments. Simulation studies show that through the risk control mechanism, the market operator is able to cover a market participant's risk with its margin.