Abstract:In the early stage of the "13th Five-Year" period,such a phenomenon as disorderly development of China's power industry still exists,resulting in the excess supply of thermal power,the curtailment of renewables and other problems.Meanwhile,with the implementation of China's new round of electric power system reform and the supply-side structural reform,the power market construction is not perfect,hence we cannot effectively explain the above problems just from the perspective of industry and market.The necessity of the orderly development of Chinese power industry is analyzed with respect to the current situation of the industrial development and the requirements of the development planning.Based on the general theory of economics,from the perspective of effective supervision,the incentive compatibility mechanism is designed.The purpose of incentive compatibility is to guide the orderly development of the power industry,to ensure the true report of corporate information,and to realize the government's effective supervision to the orderly development of power industry.By evaluating the profit,the social welfare and the future utility,the enterprises will be able to produce electricity under the government's expected level of investment.Then,the government will provide some incentives and compensation to encourage the orderly power investment by giving priority to power generation enterprises.Finally,the research conclusion is drawn,and the policy recommendations are put forward.