Professional Documents
Culture Documents
Bar Quin Gil 2000
Bar Quin Gil 2000
Abstract—A new electrical sector regulation is being im- other less expensive generation services that should be provided
plemented in different countries all over the world. The new in order to maintain the system reliability and to meet the re-
regulation stresses the role of competitive markets for the pro- quired security levels. Among these ancillary services are the
curement and remuneration of ancillary services. Among these
services stand the ones associated with reactive power supply and ones associated with reactive power support and voltage control
transmission network voltage control in order to maintain the in the transmission network.
required system security levels. In vertically integrated utilities, the provision of these type of
The object of this paper is twofold. On one hand, reactive power services is closely linked to all the other aspects of electricity
supply and voltage control services, which today are bundled, are generation, transmission and distribution: a central operator co-
decomposed in two types: (i) voltage profile management and re-
active dispatch and (ii) voltage regulation. A theoretical approach ordinates the different suppliers that provide them, the remu-
based on marginal pricing is proposed in order to clarify the prin- neration that these suppliers receive for that is usually an indis-
ciples to remunerate the suppliers and to charge the consumers of tinguishable part of their total revenues. Only final customers
these services. On the other hand, a practical organization of reac- are usually charged with a penalty associated to the ratio reac-
tive supply and voltage service markets is presented to be imple- tive-active energy consumption.
mented in a competitive environment.
Whenever the electricity supply industry is based on com-
Index Terms—Ancillary services, voltage control, reactive power petitive markets, it seems reasonable to organize the ancillary
pricing, spot pricing, competitive markets. services provision around markets. Nevertheless, given the im-
portance of ancillary services for reliability and quality of ser-
NOMENCLATURE vice, their complexity and their specific technical characteris-
tics, a significant degree of obligation and centralized control is
Active and reactive power at bus
needed.
Voltage at bus
In this paper competitive pool-based generation markets are
Reactive spot price, and losses and security compo-
considered, where there is a need for procedures to incentive
nents, at bus
the participants in the market to provide reactive services and
Cost function of device
ensure an adequate payment that guarantees the economic fea-
System marginal active power price
sibility of this business. That is the case of England and Wales,
Security component of the reactive spot price asso-
Argentina, Australia and recently Spain. On the other hand, in
ciated to constraint
some other countries, like USA, for instance in California, it has
Constraint , and its level
been proposed competitive schemes based on physical bilateral
contracts. In this later case, each transaction has consequences
I. INTRODUCTION that go beyond the involved parties in terms of additional voltage
control and reactive reserve requirements, etc. Thus, mecha-
C URRENTLY, electric power systems all over the world are
moving from a regulated environment based upon tradi-
tional vertically integrated utilities toward a more decentralized
nisms to ensure that participating agents assume the impact of
their transactions on the whole system are required [3].
environment based on a much greater extent upon competitive In Section II of this paper, the two main voltage services, re-
markets. Therefore, it is needed to address the issues related to lated on one hand to the voltage profile management and the
remuneration and charges of electrical services in this new and, reactive power dispatch, and in the other hand to the voltage
in many instances, still unknown world, in order to assure the control and dynamic security aspects, are described. Section III
technical and economical power system feasibility [1]–[2]. proposes a possible organization of two different reactive mar-
Most of the effort has been aimed toward the proper treatment kets: i) a reactive energy market based on losses spot prices,
of the remuneration of generation assets. Although generation and ii) a reactive capacity market based on a reactive regulating
investments and fuel costs are the main system costs, there are capacity payment. Then, in Sections IV and V, the theoretical
support of spot pricing understanding and computation is pro-
vided. Finally, in Section VI, based on the markets organiza-
Manuscript received August 6, 1998; revised August 11, 1999. tion proposals previously presented, practical remuneration and
The authors are with the Instituto de Investigación Tecnológica, Universidad
Pontificia Comillas, Alberto Aguilera 23, 28015 Madrid, Spain. charging procedures for reactive supply and voltage control ser-
Publisher Item Identifier S 0885-8950(00)03776-7. vices are proposed.
0885–8950/00$10.00 © 2000 IEEE
484 IEEE TRANSACTIONS ON POWER SYSTEMS, VOL. 15, NO. 2, MAY 2000
II. REACTIVE SUPPORT AND VOLTAGE CONTROL SERVICES Economic theory shows that, under fairly general conditions,
the optimal level of remuneration and charging is provided when
Reactive power management and voltage control services in
pricing the reactive power injection or absorption (a measure of
the transmission network can be decomposed into two main
the level of service) by its spot price [4]–[7]. The spot price at
types:
bus is the cost of supplying a unitary increment (the last one)
a) Voltage profile management and reactive dispatch: of reactive power demand at bus . It can be decomposed in a
This service is oriented toward the optimization of part related to the system losses cost (including generator losses)
the system active power losses cost while keeping and a part related to the security margins enhancement. A more
steady-state system security in the face of possible thoroughly discussion is presented in Section IV.
contingencies (for instance, by keeping the voltage The component of the reactive spot price associated with
profile and the reactive power reserves within margins). losses has a relatively smooth time variation. Its value is in the
It changes on an hourly basis or slower. Generators, order of something less than one US dollar per MVAr-h. On the
capacitors, reactances and distribution load management other hand, the component of the reactive spot price associated
provide this service. The role of the system operator is with the system security is usually a very small quantity, but
to perform the reactive power dispatch by taking into
in periods when the system security is threatened when it can
account the reactive control elements that belong to dif-
reach very high values. This different behavior suggests the
ferent agents: generation, transmission and distribution
creation of two different reactive power markets: a reactive
utilities, as well as the cost of using them. The procedure
energy market related to the losses cost minimization and a
to solve the optimal dispatch must be transparent, nondis-
reactive capacity market related to voltage security aspects.
criminatory among the agents and technically sound.
Optimal Power Flow (OPF) methods have been used A. The Reactive Energy Market
for this purpose. This type of services has a similarity
The reactive energy market would be based on long-term
with the active power economic dispatch related to the
bids provided by generators and other control elements to the
implementation of the hourly pool-based energy market.
System Operator. The bid format includes the margin of the
b) Voltage control: also known as voltage regulation, it is
reactive power variation (generation and absorption) and the
the service provided to keep the network voltages in a
losses curve, which relates the internal equipment losses to the
dynamic time frame (seconds to minutes). Generators,
reactive power, produced or absorbed by the control element.
SVCS, or other equipment capable of fast regulation can
These loss curves will be priced at the marginal price of the
provide it. It is oriented toward system dynamic security
hourly active energy market. The System Operator should dis-
and voltage quality. Although the economic effect is un-
patch the system including the losses generator’s reactive power
deniable, it is also difficult to evaluate. This type of ser-
curves as an additional cost to be minimized. Both generator in-
vice can be considered analogous to active power reserve
jections and reactive power demands shall be remunerated or
and frequency-control services (primary and secondary
charged by multiplying the reactive power amount by the cor-
AGC frequency regulation).
responding losses minimization spot price. Distribution utilities
or large customers would adjust their reactive power demands
III. ORGANIZATION OF THE REACTIVE SUPPLY AND VOLTAGE
taking into account the current reactive power spot prices.
SERVICE MARKETS
Fig. 1 represents the information exchange between the
Any reactive power market differs from active power markets agents in order to implement the proposed reactive energy
in certain characteristics derived from the different economic market. Generators and other control elements send to the
and physical properties of active and reactive power flows: System Operator the reactive power generation and absorption
a) The local geographic character of the reactive power limits and the internal loss curves, and distributors and large
market versus the system wide character of the active customers send the estimated reactive consumption. Then, the
power market. System Operator performs an optimal reactive dispatch taking
b) The relatively smaller investments in new equipment into account all the available reactive sources and regulating
needed to supply reactive power as compared to those equipment including those owned by the transmission network
associated with the active power generation. utility. From the solution of this optimization problem losses
Reactive smaller investments ease competition, as more reactive spot prices at each system bus are obtained. The
agents can participate in the market (for instance, investing in System Operator sends to generators and control elements the
SVCS). On the other hand, the local character of the reactive voltage reference values that they must control. It also sends
flows can cause that, in some moments, just one (or a few) the reactive spot prices that would be used to remunerate the
generator can provide the required reactive energy, leading to generators and control elements and to charge the demands.
monopolistic behavior. One way to avoid that possibility is by
requiring longer term bids than in active power markets. In that B. The Reactive Capacity Market
way, generators can not bid, in any case, their reactive energy The reactive capacity market would be also based on
higher than the cost of alternative reactive power generation long-term capacity bids provided by generators and SVC’s
means. Actually, the market size grows because it is “enlarged” to the System Operator to ensure system voltage security.
in the temporal direction, trying to compensate for the loss of For selected bids there is a long-term obligation for voltage
competition among agents trough, so to speak, the space. regulation in their connection buses. The control element will
BARQUÍN GIL et al.: REACTIVE POWER PRICING 485
The active power spot price can be understood as the sum of Therefore, the total amount during a considered period is cal-
the system marginal active power price plus the incremental net- culated as:
work losses cost plus the incremental cost associated to network
active constraints [9], [11]. The main difference with respect to (7)
the reactive spot price formula is the substitution of the system
marginal cost for the weighted sum of the reactive costs of the However, the security component shows a high degree
generators, which responds to the load reactive increment. That of volatility, reaching high values in some critical periods (for
substitution embodies the local character of the reactive power instance, when reactive reserves are needed), and going down
flows and it is the main reason because reactive prices are in zero in most of time.
general much smaller than active prices. To avoid this undesirable effect, it is proposed that the re-
muneration associated with reactive reserves and reactive regu-
C. Losses and Security Reactive Prices lating capability would be made through a “capacity payment”.
In order to compute the capacity payment, let us assume
The previously presented decomposition of the reactive spot
that under ideal conditions for perfect competition, the optimal
price into a losses component and a security component has im-
amount of investment is given by the profit obtained by the
portant advantages from the point of view of organization of
equipment when it is paid at the spot price [10]. On the other
reactive markets. System operational constraints are related to
hand, to invest in a new equipment connected at bus with
maintain the system under specific security levels, such as to
an available reactive capacity ( ) and a specific type of
impose a certain level of reactive power reserves in each system
regulating control (AVR, SVC, secondary voltage loop, etc.) is
area or to keep system voltages above security lower limits. As-
tantamount to increase the critical operational constraint
suming that all the system constraints are security-related, it is
in a quantity (for instance, an equivalent increase in
straightforward the following term identification for the reactive
the reactive reserve in an area).
price losses component and the security component
Therefore, the marginal benefit associated with the new in-
vestment, expressed for instance as a decrement of the cost of
the expected nonsupplied energy (NSE) would equal the mar-
ginal cost of investment. Thus
(4) Total investment
(8)
TABLE I
[3] S. H. Hao and A. Papalexopoulos, “Reactive Power Pricing and Manage- Julián Barquín Gil received the Ingeniero Industrial Degree and the Doctor
ment,” IEEE Transactions on Power Systems, vol. 12, no. 1, Feb 1997. Ingeniero Industrial Degree from the Universidad Pontificia Comillas, Madrid,
[4] M. C. Caramanis, et al., “Optimal pricing: practice and theory,” IEEE in 1988 and 1993 respectively; and the Licenciado en Ciencias Físicas Degree
Transactions on Power Apparatus and Systems, vol. PAS-101, no. 9, in 1994. He belongs to the research staff at the Instituto de Investigación Tec-
1982. nológica. His present interests include control, operation and planning of power
[5] M. Rivier, J. I. Pérez-Arriaga, and G. Luengo. JUANAC: a model for systems.
computation of spot prices in interconnected power systems. presented
at 10th Power Systems Computation Conference
[6] M. L. Baughman and R. Siddiqi, “Real time pricing of reactive power:
theory and case study results,” IEEE Transactions on Power Systems, Tomás Gómez San Román obtained the Degree of Doctor Ingeniero Industrial
vol. 6, no. 1, Feb. 1991. from the Universidad Politécnica, Madrid, in 1989, and the Degree of Ingeniero
[7] W. Hogan. Electric power spot pricing in a network: DC vs AC price Industrial in Electrical Engineering from the Universidad Pontificia Comillas,
models. presented at 15th Annual International Conference of the Inter- Madrid, in 1982. He is a research fellow and since 1994 Director of the Instituto
national Association for Energy Economics de Investigación Tecnológica. He has been involved in more than thirty research
[8] N. H. Dandachi, M. J. Rawlins, O. Alsac, M. Prais, and B. Stott, “OPF projects with Spanish and European utilities. His areas of interest are planning
for Reactive Pricing Studies on the NGC System,” IEEE Transactions and operation of transmission and distribution systems, power quality and reg-
on Power Systems, vol. 11, no. 1, Feb. 1996. ulatory issues.
[9] M. Rivier and I. J. Pérez-Arriaga. Computation and decomposition of
spot prices for transmission pricing. presented at Power Systems Com-
putation Conference Juan José Alba Ríos obtained the Degree of Doctor Ingeniero Industrial and
[10] J. I. Pérez Arriaga, “Curso de Doctorado Mercados de Energía Eléc- the Degree of Ingeniero Industrial from the Universidad Pontificia Comillas,
trica,” (in Spanish), Universidad Pontificia Comillas, Instituto de Inves- Madrid, in 1996 and 1986, respectively. He has been Researcher of the Instituto
tigación Tecnológica, Madrid, 1994. de Investigación Tecnológica until September 1997. His areas of interest are
[11] M. Rivier, J. I. Pérez-Arriaga, P. Sánchez, A. Ramos, and T. Gómez. artificial intelligence, knowledge engineering, machine learning, planning and
An improved version of the model JUANAC: Applications to network search problems, applications to power system operation and other industrial
adequacy and economic studies in large interconnected power systems. problems.
presented at 4th Probabilistic Methods Applied to Power Systems Con-
ference
[12] J. Barquín, D. Soler, O. Largo, G. Relaño, and I. de la Fuente. On the cost
of the reactive power generation and voltage support service. presented Pedro Sánchez Martín obtained the Degree of Ingeniero Industrial from the
at Bulk Power Services and Control IV Universidad Pontificia Comillas in 1993. He is Research Assistant at the Insti-
tuto de Investigación Tecnológica. His areas of interest include the operation
and planning of power systems.