Reactive power as an ancillary service: issues in optimal procurement

This paper attempts to address the problem of reactive power support procurement by an independent system operator (ISO) in a deregulated electricity market. A possible structure of reactive bid is proposed and discussed in the context of establishment of reactive power markets. The reactive capability of a generator, the reactive power bids and contracted real power bilateral transactions are modeled within an optimal power flow (OPF) framework. Optimum reactive power procurement by the ISO is obtained considering minimization of network losses, deviation from contracted transactions and payment to reactive devices according to bid price. The CIGRE 32-bus network, which approximately represents the Swedish system, is used for the studies.