A Comparative Analysis of Two Pricing Mechanisms, MCP and PAB, in the Chinese Frequency Regulation Market

Xian Huang () and Zhehan Li
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Xian Huang: School of Control and Computer Engineering, North China Electric Power University, Beijing 102206, China
Zhehan Li: School of Control and Computer Engineering, North China Electric Power University, Beijing 102206, China

Energies, 2023, vol. 16, issue 6, 1-23

Abstract: In the face of the new reform of China’s “unified electricity market”, the frequency regulation ancillary service market in each region of China is still divided between using the MCP and PAB pricing mechanisms. The purpose of this paper is to explore the different impact the laws of the above two pricing mechanisms have on the frequency regulation market and to provide relevant suggestions for this electricity market reform. This paper simulates the competitive activities of the frequency regulation market based on the multi-agent simulation model, conducts a comparative experiment by changing the pricing mechanism to a single variable based on the rules of the Sichuan frequency regulation market in China, and concludes that MCP can make the market fast and stable, and that its market settlement price is low, which is suitable for the “unified electricity market”. Although PAB makes the market settlement price high, it can ensure the retention of high-performance units in the market, and the stable settlement price makes this model able to accurately reflect the “price signal”, making it suitable for late adoption in the “unified electricity market”.

Keywords: electricity frequency regulation markets; pricing mechanisms; MCP; PAB; multi-agent (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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