  We discuss an incentivizing market and model-based approach to design the
energy management and control systems which realize high-quality ancillary
services in dynamic power grids. Under the electricity liberalization, such
incentivizing market should secure a high speed market-clearing by using the
market players' private information well. Inspired by contract theory in
microeconomics field, we propose a novel design method of such incentivizing
market based on the integration of the economic models and the dynamic grid
model. The conventional contract problems are analyzed for static systems or
dynamical systems with control inputs directly operated by the principal. The
analysis is, however, in discord with the incentivizing market. The main
challenge of our approach is to reformulate the contract problems adapted to
the market from the system and control perspective. We first establish the
fundamental formulas for optimal design and clarify the basic properties of the
designed market. We also discuss possibilities, limitation and some challenges
in the direction of our approach and general market-based approaches.
