High-cost generator units are at a cost disadvantage in electricity spot markets. This study focuses on revenue mechanisms of gas-fired units affected by power market reform in Guangdong province

China. For the first time

we compare impacts on market indicators of five settlement mechanisms: feed-in tariff (FiT)

location marginal price (LMP)

contract for difference (CFD)

direct subsidy (DS)

and estimated revenue method (ERM). In particular

we design key parameters

including authorized CFD and ERM of two kinds of government authorized contracts based on traditional dispatching patterns to avoid significant profit fluctuations brought by market reforms. We also analyze impact of factors such as climbing performance

seasonal load

and subsidy amount on the overall market and its players. Results of a case study show to directly subsidize gasfired units will lead higher-cost units to generate more electricity

with a resulting loss of social welfare. Disruption of market prices and provision of unreasonable incentives are fatal disadvantages of this subsidy method. The government and policymakers should consider financial means to adjust benefits to reduce production costs and increase social welfare. Also

by case analysis

the ERM shows its stable performance in revenue of high-cost units

while we find that authorized CFD is not applicable for gas-fired units whose output is unstable as a marginal unit frequently. Therefore

we suggest government agencies adopt ERM to sign contracts with gas-fired units

to attain a balance between fairness and efficiency.