Environmental Engineering Reference
Representation of a bilateral contracts market
power will introduce a degree of price volatility in the energy market. It will also
mean that the expected revenue for wind from the electricity market will be
somewhat lower than the expected price would indicate, as there is a negative
correlation between volume and price. Other correlation effects will also affect the
revenue. Typically, it is windier during the day than at night (Figure 5.9), and
typically electricity demand is higher during the day than at night (Figure 5.10),
and hence the price is higher. The positive correlation will tend to increase the
expected revenue from wind power. Seasonal patterns will also be influential. In
some geographical areas, Ireland for example, it is windier during the winter
months (Figure 5.9), when electricity demand is also higher. Such a positive cor-
relation will tend to increase wind revenue. In contrast, there are other geographical
areas where the load is higher during the summer, and the opposite may occur.
Another option is to sell the energy bilaterally to another party, typically a
supplier. Such bilateral arrangements (Figure 7.2) can be agreed years in advance.
Bilateral trading will continue until gate closure, when all bilateral trades are
reported to the system operator. The British Electricity Trading and Transmission
Arrangements (BETTA) is a market of the bilateral type (OFGEM, 2004). For
bilateral deals, however, there will be a need to match the generator output with the
suppliers' needs. The supplier needs will be related to an aggregation of their
customer needs and will vary typically with time of day, week and season. Such
a bilateral deal will be difficult for wind generation to meet, as it is variable.
Therefore, wind generation will need a balancing market where it can buy elec-
tricity to fulfil its side of the bilateral contract.
Balancing, capacity and ancillary services
Regardless of which mechanism is used in the electricity market to trade energy
there will always be some form of central market for balancing. The balancing
market is necessary as the quantities of energy required by the load for different
times in the future are not known exactly, and there is a need to balance supply and