Capacity market mechanism design considering network optimization and energy transition

The coordination of energy transition, fixed cost recovery, and the sufficient generation supply leads to a new challenge on the traditional capacity market mechanism. Moreover, in order to better match the network expansion, it is crucial to redesign the capacity market mechanism considering system topology at the same time. In this paper, a novel capacity market mechanism is proposed considering spot market operation, network expansion, and energy transition, which can minimize the total cost of capacity investment, network expansion, and generation operation while satisfying the energy transition constraints and topology circumstances. Specifically, the capacity market mechanism coordinated with spot market operation is illustrated, in which the energy transition and network constraints are embedded. Then, a bi-level optimization model is established where the trade organizers minimize the total cost of both investment and operation with subject to the spot power market in minimizing the local dispatching costs simultaneously. The numerical results of a test system show that more economical capacity portfolios can be obtained by constructing reasonable transmission lines, thereby obtaining a more optimal market cost. A detailed multi-scenario simulation is further analyzed to verify the effectiveness of the proposed market mechanism.