Abstract
Reactive power spot markets have been proposed by many in the power engineering community as a means of reactive power compensation within the U.S. deregulated energy markets. Cited benefits include incentive for proper reactive power investment for power system stability, the minimization of costs to meet load, and proper reactive power price signals. However, the market power that can be exercised by utilities may render the market useless for consumer participants. In addition, the zero price of reactive power as well as the volatility in demand may not inspire the investment that spot markets are thought to encourage, and current methods of pricing reactive power involve time-consuming optimizations. An ACOPF simulation was run utilizing a representative urban transmission and distribution system, confirming many of the weaknesses theorized to exist in real time reactive power spot markets including exercise of market power and price volatility.
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