With the increasing penetration of intermittent and uncertain power sources such as wind power and photovoltaics

the renewable energy deviation in the power market transactions continues to grow

exposing renewable energy market participants to balancing price risk. This paper first systematically proposes a balancing market improvement scheme based on incomplete contract theory and designs an ex-ante decentralized balancing model to mitigate balancing price risk through pre-signed balancing service contracts. This model complements the existing balancing market. Then

this paper constructs a market equilibrium model incorporating balancing service contracts to explore their impact on real-time balancing price volatility

verifying the effectiveness of the improved balancing market in reducing price risk. Finally

case study results demonstrate that introducing balancing service contracts can reduce price volatility

improve market stability

and mitigate balancing price risk to renewable energy sources.