Forward Contract Decomposition‐Based Optimal Residential Pricing Strategy for Retailer Under the Forward and Spot Market Trading

Forward contract decomposition plays a vital role in the pricing strategy and overall profits of electricity retailers. However, due to the infancy of the market transaction mechanism in China, the conventional forward contract decomposition method with fixed daily disintegrated results is widely adopted by retailers, which may lead to a mismatch between segmented power and actual electricity consumption. Further, this mismatch, together with unexpected fluctuations in spot price, could bring retailers higher market risks, conservative pricing results, decreased profits, and so on. Therefore, an optimal contract decomposition method considering monthly contract disintegration deviation minimisation and its impact on retail pricing strategy comparing typical decomposition approaches is investigated in this paper. Based on the contract decomposition and time segmentation results, the TOU price is settled by solving a multi‐objective optimisation problem considering the retailer's expected profit maximisation while managing risks. The case study considering various price sensitivities of customers verifies the effectiveness of the proposed approach, and the profits of the retailer have been improved under the proposed strategy.