Multi-agent Negotiation in Electricity Markets

Abstract

The electricity industry throughout the world, which has long been dominated by vertically integrated utilities, has experienced major changes. Basically, liberalization has separated the contestable functions of electricity generation and retail from the natural monopoly functions of transmission and distribution. This, in turn, has led to the establishment of electricity markets (EMs)—systems for effecting the purchase and sale of electricity using supply and demand to set energy prices. Ideally, competition and innovation would lead to lower prices and better uses of energy resources. However, the analysis of important EMs yields the main observation that they are still far from liberalized. Stated simply, tariffs do not reflect the pressure of competition. This article addresses the challenge of using software agents with negotiation competence to help manage the complexity of EMs towards ensuring the full benefits of deregulation. Specifically, it presents a multi-agent electricity market composed of a collection of autonomous agents and describes a generic framework for bilateral negotiation. Market participants equipped with the framework are able to enter into fixed price forward contracts and to reach (near) Pareto-optimal agreements.