A novel value based reactive power procurement scheme in electricity markets

Abstract

Good reactive power management is essential for the secure operation of power systems and reactive power support is considered as an essential system support service for competitive electricity power markets. Analyzing the cost of providing reactive power service and establishing appropriate pricing structure are important both financially and operationally for reactive power procurement. In order to procure reactive support competitively from the markets, it is necessary to quantify the price of the reactive power source output. This paper presents an algorithm for procuring reactive power from reactive resources based on a reactive power pricing structure. The algorithm takes into account reactive power capacity and production costs as well as the value of reactive power. Results on a sample test system illustrate the feasibility and validity of the algorithm.