Abstract
The design of the power generation capacity adequacy mechanism requires comprehensive consideration of political goals, power systems, power markets and other factors. Although various adequacy mechanisms have been developed and practiced, they all suffer from certain problems. After a comprehensive investigation of the mechanisms of scarcity pricing and capacity market, this paper proposes a novel power generation capacity adequacy mechanism based on revenue call options, which is divided into two processes: forward contract auction and short-term market settlement. The forward contract auction can guarantee participants a steady revenue, and the short-term market settlement process is combined with scarcity pricing to provide accurate price signals. Then, the effectiveness and feasibility of this mechanism are verified by simulation analysis using data collected from Jiangsu Province. The results show that this mechanism can effectively restore the price signal, fix the economic risk, and ensure the unit to recover all the capacity cost and energy cost.
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