Study of the compensation mechanism of reserve service in the primary power market

Reserve service payment is a major problem in the initial period of the de-regulated electricity market for the system reliability in China. The reserve costs of various reserve suppliers are analyzed, and especially the opportunity cost calculation formulas and the relationships with the energy cost are studied. Based on the situation of the electricity market in China, the paper researches into the mechanism of the compensation of the reserve service. Then, the compensation model of the service with incentive mechanism based on the reserve cost, the reserve value, the power system reliability is proposed. Finally, the use of the model is illustrated and some market policy implications are discussed.