Faculty of Electrical and Computer Engineering, Semnan University, Semnan, I. R. of Iran


In order to improve the reliability of the power system, sufficient amount of new capacity should be installed in the network. Usually generation units’ payoff in an energy market is not adequate to cover their expenses. Therefore, energy only market cannot induce investors to invest in generation field. Due to energy only market inefficiency, a supplementary algorithm is suggested to cover the mentioned defect and consequently to have adequate level of generation to meet demand in peak periods. This work tries to present a new pay as bid capacity market in which consumers compete with each other in order to obtain their adequate level of subscribed capacity. In this model, consumers bid their optimum subscribed capacity level alongside their optimum capacity price to the ISO. ISO clears the market considering the proposed capacity level from the generation side and capacity bids from the demand side. Those consumers which are accepted in the market, buy their market admitted capacity levels based on their proposed capacity prices. The generation units’ payoffs obtained from the proposed capacity market increase the investors’ incentive to invest in new power plants which results in higher available installed capacity in the time of peak load. For more transparency, two kinds of uncertainties (short-term and long-term uncertainties) are taken in to account to model the consumers and market behavior and system is simulated over a long planning horizon and obtained results are compared with two other types of markets, Energy Only and basic Capacity Subscription. The impressive results obtained from the simulation show the efficiency of the new proposed method.