Quantify the Impacts of Capacity Market on Generation Adequacy in a Practical Power Grid

As an important part of power market, capacity market has the effectiveness of ensuring the long-term capacity adequacy. This paper analyzes the influence of the capacity market on system capacity adequacy in a typical provincial power grid in China. A framework for evaluating the performance of a capacity market is proposed. A market simulation process with four modules including the initial investment decision, energy market, capacity market, and final investment decision, is established to construct the investment incentive provided by the capacity market. Two parameters including the Loss of Load Hours (LOLH) in general scenarios and the load shedding in extreme scenarios are used as indicators to evaluate system adequacy. Based on the practical utility data, the results verify the effectiveness of the capacity market in ensuring generation adequacy. The case study also reveals that the capacity market plays an important role in ensuring power supply in extreme weather with a sudden decrease in renewable energy output.