Conditional-Robust-Profit-Based Decision Model for Flexible Contract between Electricity Retailer and Customer

In the electricity retail market based on real-time pricing, the price of electricity is highly volatile and uncertain. Customers need to adopt appropriate risk management tools to avoid or control risk. In this paper, a flexible contract is proposed based on the idea of optional contract between an electricity retailer and customer, in which the customer can set the strike price of the flexible contract as the highest market price it is willing to pay. In order to determine the risk premium of the flexible contract and encourage both parties to participate in the contract transaction, the upper limit of the premium is determined by the condition that the customer’s net utility with the flexible contract is not less than that without the contract. Then from the electricity retailer’s viewpoint, a conditional-robust-profit-based optimization model is also proposed to determine the premium considering its upper limit. Numerical examples are presented to verify the reasonableness and effectiveness of the model.