Pricing and Cost Allocation Methods for Capacity Charges of Pumped Storage Power Stations in Electricity Market Environment

Pumped storage power stations, as effective flexibility resources for power systems, will become crucial in ensuring the safe and stable operation of new power systems. The formulation of reasonable schemes for recovering the fixed costs of construction of pumped storage power stations is a key issue in supporting system operation and stimulating investment. In the context of marketization operations for pumped storage power stations, this paper constructs a capacity charge pricing model that sequentially integrates the pumped storage power stations into the spot and ancillary service markets, achieving regular recalibration of the unallocated costs of pumped storage power stations with the objective of revenue and expenditure balance during the operation period. Meanwhile, considering the potential entities for allocating the capacity charges of pumped storage power stations, a utility-proportional Vickrey-Clarke-Groves (VCG) mechanism is proposed to allocate costs of the capacity charges of pumped storage power stations, quantify the substitutive benefits of allocation entities on both the source and load sides, and proportionally allocate the capacity charges. Effectiveness of the proposed method is validated through simulation analysis of actual system cases. © 2024 Automation of Electric Power Systems Press. All rights reserved.