This study analyses the impact of the introduction of the forward contract market to Korean wholesale spot market with two-way bidding pool on the electricity market price level, volatility and supply reliability through Agent-based Model Simulation fitted with realistic market rules. The analyses have proceeded by varying the values of parameters that are expected to be crucial in the determination of the extent and direction of forward contract market impact.
As a result, the relative increase in the electricity market price and reserve margin was observed in the analysis of the case with forward contract market. This result is different from the results suggested by Green(1999), Allaz and Vila(1993), and Bunn and Oliveira(2001). The consistent maintenance of the forward contract market impact is also confirmed even when the way of settlement, rate of demand increase, range of bid price and number of bids are varied in some designated extent.
And it is observed that whether the forward contract market exists or not, the market price level and volatility is lower but reserve margin is higher with Pay-as-Bid than Pay-as-SMP. The result about price level and volatility is different from that of Bower and Bunn(2000), who suggested that the market price level is higher but volatility is lower with Pay-as-Bid than Pay-as-SMP.
