Impact of capacity market mechanism on high renewable penetration systems with long‐term energy storage

Capacity markets (CMs) have been widely analysed and implemented in various regions to enhance the capacity adequacy and supply security in power systems with high renewable penetration. This study compares the performance of two market designs, an energy market combined with a CM and an energy‐only market, using a capacity expansion model that incorporates long‐term energy storage (ES). This study contributes significantly to the debate on CM by quantifying the improvement in the system reliability. Through simulations conducted on provincial power systems in China, we demonstrate that introducing a CM significantly enhances the system reliability by providing a stable revenue stream that incentivises capacity investments. Additionally, the effectiveness of implementing a CM is analysed through simulations under various market conditions, thereby presenting various advantages. Furthermore, the results of this study indicate that the reliable availability of conventional technologies is essential for future power systems with high renewable energy penetration. The supply security cannot be ensured with an excessive penetration level of renewable energy sources, despite long‐term ES. These findings present critical insights into the design of hybrid electricity markets for transitioning power systems.