A Dynamic Payment Method in Capacity Mechanisms

In order to ensure the adequacy of power generation capacity, electricity markets generally provide compensation for generation units through capacity mechanisms. The forward capacity market and the operating reserve curve adder of scarcity pricing are the most important capacity mechanisms at present. The forward capacity market needs to use a penalty mechanism during the implementation process to avoid units that receive the capacity income from failing to fulfill their capacity responsibilities. The operating reserve curve adder provides additional subsidies for capacity in the form of real-time electricity price plus scarcity price, which requires a relatively complete ancillary service market. This paper gives a calculation method for the capacity demand curve based on the Expected Unserved Energy (EUE), which is calculated by the Power System Probabilistic Production Simulation based on the Available Capacity Distribution (ACD Method). By using the ACD Method which calculate the EUE according to the chronological load, the capacity demand curves under different load levels can be calculated, and the real-time payment can be made based on these demand curves. The sum of the real-time payment equals the annual payment using annual capacity demand curve payment. By utilizing this property, this paper proposes a dynamic payment method in capacity mechanisms, which has the advantages of scarce electricity price payment such as only the capacity provided by the service is compensated, avoiding the implementation of market power, etc. Unlike scarce electricity prices, the capacity payment amount in this paper is consistent with the Power system reliability indicators, thus having a better engineering foundation. The calculated results based on the IEEE Reliability Test System (IEEE RTS) verify the characteristics of the proposed method.