The electricity industry reformation in China puts forward new requirements for the power grid operation and electricity market construction. The unreasonable compensation mechanism of the existing frequency regulation auxiliary service promotes the possibility of its marketization in China. Firstly

this paper presents the sequential relationship between medium-term and long-term electricity contract and frequency regulation auxiliary service market. The concept of effective capacity is proposed based on the threshold value of performance indicator. The decoupling design of frequency regulation market mechanism adapted to the medium-term and long-term electricity contract decomposition in China is proposed

which can reflect the performance difference of units. After the frequency regulation market is cleared

the dispatching department can give priority to successful bidding for basic output. Considering the contract electricity and safety check constraints

the unit generation curves are arranged. Finally

an example is given to verify the effectiveness of the overall process. Based on the current implementation situation in China

the new frequency regulation market mechanism can ensure the system demand capacity

and motivate units to participate in the frequency regulation market.