Abstract
This paper proposes an active-reactive power dispatch procedure that is expressed via a bilevel optimization problem whose upper and lower level criteria are, respectively, the minimum opportunity cost and minimum offered price of active power. It analyzes the impact of minimizing such criteria on system operation, and it investigates the behavior of marginal prices and opportunity costs and their use in mechanisms to compensate generators for power provision. The bilevel problem is solved using a version of interior point methods derived for mathematical programs with complementarity constraints. Results obtained with three test systems are analyzed.
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