Agent-Based Models for Electricity Markets Accounting for Smart Grid Participation

A better understanding of the process of setting wholesale electricity prices does benefit not only the generating companies but also the end users as it forces them to be responsible with their energy use in the time of peak electricity demand leading to smaller fluctuations in demand. Determining when a generator could maximise the profit based on demand fluctuations reduces risk and potential losses that could occur for generating companies. Based on this premise, this paper will outline the use of agent-based models (ABM) in future wholesale energy markets. By comparing agent-based modelling with methods currently employed by economists, this paper will show the impact ABM can have on developing a safer market structure. The results will propagate the idea of agent-based models influence on managing risks, controlling demand, and maximising profit in a time of smart grid technology. This paper is a proposal for work on smart grids in union with agent-based modelling being done in the future if suitable and useful.