User Cost Differences under Five Capacity Adequacy Mechanisms Based on Equilibrium Analysis

Capacity adequacy mechanisms are crucial pathways to ensure reliable power supply in electricity grids and are coupled with the spot electricity market. However, current studies on the impact of capacity adequacy mechanisms on the electricity market do not simultaneously consider the strategies of power generators regarding bidding, investment, and capacity sales, as well as the strategic behaviors among multiple stakeholders. To address this, we propose game-theoretic equilibrium models for multiple power generators under five typical capacity adequacy mechanisms: scarcity pricing, strategic reserve, capacity subsidy, capacity market, and reliability options. Firstly, we establish a two-layer game model for each capacity adequacy mechanism: the upper layer is the strategic optimization model for power generators, and the lower layer is the day-ahead market clearing model. Secondly, by using the optimality conditions of the lower model and a series of precise linearization methods, the two-layer models are transformed into several mixed-integer linear programming problems, and the game equilibrium is iteratively solved using a dynamic game framework. Case studies show that, compared to scarcity pricing mechanisms, reliability options can suppress the market power abuse by power generators during high-load periods and lead to a market equilibrium with lower user costs, while the other three mechanisms can only maintain or increase user costs.