Because of the rapid growth of new energy and the accompanying considerable uncertainty in the power market

the demand for flexibility in a power system has risen sharply. In the meantime

the market structure of auxiliary services has changed

resulting in market participants (MPs) benefiting less than expected from providing flexible services. To encourage MPs to provide flexibility

this study proposes a dynamic design framework for an auxiliary service compensation mechanism. To evaluate the proposed framework

a case study is conducted

examining a peak-shaving service in Liaoning province in northeast China. First

the operational status and limitations of the typical product

the peak-shaving service

in China's flexibility auxiliary services market are analyzed. Then

taking into consideration the time value of the flexible products provided by the MPs

a dynamic mechanism for hierarchical compensation of flexibility auxiliary service costs is proposed

and a mathematical model aimed at optimizing the MPs' comprehensive income is constructed. The results show that

compared with the existing traditional mechanism

the proposed method can effectively guarantee fair remuneration for the flexibility provider

while easing the tense supply-demand relationship in the flexibility market.