Designing incentive market mechanisms for improving restructured power system reliabilities

In a restructured power system, the monopoly generation utility is replaced by different electricity producers. There exists extreme price volatility caused by random failures by generation or/and transmission systems. In these cases, producers' profits can be much higher than those in the normal state.

The reliability management of producers usually cannot be directly controlled by the system operators in a restructured power system. Producers may have no motivation to improve their reliabilities, which can result in serious system unreliability issues in the new environment. Incentive market mechanisms for improving the restructured power system reliabilities have been designed in this paper.

In the proposed incentive mechanisms, penalty will be implemented on a producer if the failures of its generator(s) result in the variation of electricity prices. Incentive market mechanisms can motivate producers to improve their reliabilities through maintenance action or through replacement / refurbishment of old equipments.