Inertia Market: Mechanism Design and Its Impact on Generation Mix

Increasing penetration of renewable energy generation poses a challenge to power system inertia adequacy. It is vital provide long-term incentive signals induce mix with adequate supply. However, existing literature rarely studies mechanisms or considers constraints when making investment decisions. Thus, we propose an market quantify the value and remunerate provision. To examine impacts on mix, then stochastic bilevel equilibrium model that depicts multi-leader multi-follower Stackelberg game. The lower level proposed market, along energy, reserve, capacity markets. upper multiple profit-maximizing strategic producers, each producer able build gas-fired generators, wind storages. Numerical experiments demonstrate supply can be induced whereas there shortage without market. Interestingly, considering carbon taxes, it more cost-competitive invest in resources virtual facilities than substitute by thermal generators. Correspondingly, introduction does not significantly reduce shares but boosts facility penetration. Our findings imply future powered fully decarbonized inertia.