Stress testing on electricity market with retail transactions opened

In view of insufficiency of routine risk assessment to extreme events, stress testing plays a very significant role in modern bank risk management, especially for risk measurement at extreme situations, as an important supplement to traditional model such as VaR (Value at Risk). This paper applies stress testing tool in financial field to electricity field for the first time. As for economic and security risks in China's electricity market with retail transactions opened, stress testing is conducted, including sensitivity analysis and scenario analysis. Based on key indices obtained from sensitivity analysis, comprehensive influence at extreme situations on target indices is shown with scenario analysis. An example illustrates that stress testing is able to directly indicate risk exposure degree in electricity market in future, and can be used as an effective tool for risk control in power system reform process.