A study of reactive power marginal price in electricity market

Abstract Developing an accurate and feasible method for reactive power pricing is significant in the electricity market. The reactive power price cannot be obtained accurately by conventional optimal power flow models which usually ignore the production cost of reactive power. In this paper, the authors include the production cost of reactive power into the objective function of the optimal power flow problem, and use sequential quadratic programming method to solve the optimization problem and obtain reactive power marginal price accordingly. A five-bus test system is used for computer study. The results from eight study cases show clearly the effects of various factors on reactive power marginal price.