Probabilistic security analysis of bilateral transactions in a deregulated environment

This paper addresses one of the most critical questions in power system operation and planning in a deregulated environment, namely, how to evaluate an electricity transaction on the basis of system security, especially when numerous transactions have to be processed simultaneously. From a planning perspective, the question of how to identify the most suitable reinforcements needed to maintain system security so that all entities (e.g. producers, consumers and traders etc.) can have equal opportunity to buy or sell is also addressed. Monte Carlo simulations are used to construct a large population of random bilateral transaction matrices (BTM) simulating the market activities. Quantitative measures, termed the probabilities of secure transactions (POST), are derived from the simulation results to analyze the feasibility of transactions in terms of security. The impact of firm contracts on system security as measured by POST is also studied under different operating and planning scenarios.