Pricing for Reactive Power and Ancillary Services in Distribution Electricity Markets

Abstract

Increasing amounts of distributed energy resources (DERs) are being integrated into distribution power grids. DERs have significant potential to provide grid services, in addition to power, to improve the economics and security of grid operation. However, valuation and pricing mechanisms are needed to incentivize DERs to provide grid services. This paper proposes anew optimization model for pricing ancillary services and reactive power in distribution-level electricity markets based on the concept of distributional locational marginal prices (DLMPs). First, this paper presents a distribution market-clearing model that co-optimizes the dispatch of active power and reactive power from DERs. Next, a pricing model for joint power and ancillary services, in the form of regulation up andregulation down, is developed. Simulations and sensitivity analysis are conducted on a modified IEEE 33-node distribution network. The impacts of DER capacity, DER bidding price, and regulation reserve requirement on nodal active and reactive power and ancillary service pricing are analyzed.