Design of Tiered Capacity Market Mechanism with Generation and Consumer Participation in China

In recent years, the rapid growth of renewable energy power generation and the rising proportion of installed capacity have introduced new difficulties and challenges to the regulatory capacity of the power system. The capacity market represents a crucial component of the mature electricity market system. It ensures the return on the power system regulatory resources and plays a significant role in maintaining the long-term abundance of generating capacity. The paper collates the existing capacity guarantee mechanisms at home and abroad, and analyze the development mode of the capacity mechanism suitable for the actual conditions in China. The research innovatively designs a capacity market mechanism that engages market participants on both sides of power generation and utilization. It also elaborates on the key aspects of declaration, clearing, and settlement. Additionally, the proposal suggests the establishment of a tiered capacity market in the context of the rapidly increasing number of small market participants, such as distributed power sources. The articulation mechanism of different tiers of capacity market is clarified, with the intention of providing useful reference for the construction of the capacity market in China.