Investigating flexibility contracts in electricity markets considering single-price and 15-minute imbalance settlement

• Four-stage stochastic decision-making problems for RETs and VREPs. • Single-price imbalance settlement and 15-min time resolution investigations. • Holistic market-clearing for day-ahead, intraday, and balancing markets. • Higher profit for RETs and VREPs as participants of flexibility contracts. • Lower flexibility price and system operating cost considering flexibility contracts. Flexibility Contracts (FlexCons), in the context of power and energy systems, aim to address challenges arising from uncertainties in electricity consumption and variable renewable generation using a bilateral short-term instrument. Through such contracts, electricity retailers (RETs) and variable renewable energy producers (VREPs) agree to provide power flexibility to one another to reduce the impact of imbalances on their respective decision-making processes. In this paper, two four-stage decision-making problems are developed for RETs and VREPs to analyze their participation in FlexCons alongside the day-ahead market (DAM), intraday market (IDM), and balancing market (BLM). The proposed models incorporate uncertainties in market prices, electricity consumption, and renewable generation through scenario sets and a stochastic decision-making approach. Additionally, the framework includes single-price and 15-minute imbalance settlement, as well as location-specific considerations within the system. Subsequently, the outcomes of these decision-making problems are integrated into the market-clearing processes of DAM, IDM, and BLM to assess the positive and negative impacts of such bilateral transactions. A two-bus illustrative example and the IEEE 24-bus RTS system are used for simulations. The results indicate higher profit for FlexCons’ participants by 1.6%, lower flexibility prices in the BLM by 6.8%, and an overall reduction in system costs by 4% when FlexCons are used.