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arXiv · 2511.08736

A Risk-Based Equilibrium Analysis of Energy Imbalance Reserve in Day-Ahead Electricity Markets

Ryan Ent·Golbon Zakeri·Tongxin Zheng·Jinye Zhao
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Abstract

Energy imbalance reserve (EIR) product is introduced into the Independent System Operator (ISO) of New England's day-ahead wholesale electricity market to provide a better fuel procurement incentive for generating resources. Different from existing forward reserve products, EIR is a novel real option product, which is settled against real-time energy price rather than reserve prices. This novel product has not been analyzed in the research literature in terms of its effects. In this paper, we develop a stochastic long-run equilibrium model that incorporates the risk preference of generator and demand agents participating in the energy and reserve market in both day-ahead and real-time time frame. In a risk neutral environment, we find that the presence of the EIR product makes little difference on market outcomes. We also conduct a series of numerical simulations with risk-averse generators and demand, and observed increased advanced fuel procurement when the EIR product is present.

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Ryan Ent, Golbon Zakeri, Tongxin Zheng, Jinye Zhao. 2026-04-06. A Risk-Based Equilibrium Analysis of Energy Imbalance Reserve in Day-Ahead Electricity Markets. https://arxiv.org/abs/2511.08736

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