2004 IEEE Intemational Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004)April 2004 Hong Kong
Research on Procurement Strategy of Reactive
Power as Auxiliary Service in Power Markets
Li Gengyin, Member, IEEE, Zhou Ming, Student Member, IEEE, Yang Juan, Sun Liying
Abstract -- For reactive power as a kind of auxiliary
service in power markets, based on analysis to generators’
operation limits and production cost of reactive power, this
paper proposes a segmented bidding model of generators’
reactive power generation. The proposed model ensures
generation companies to compensate “loss of opportunity
cost” by the generator generating amount of reactive power
instead of active power, also suitable for independent system
operator (ISO) procuring enough reactive power to meet the
demand of reactive power and voltage support by power
systems. From the viewpoint of ISO, this paper provides a
dispatching reactive power model, based on optimal power
flow, which are minimized both the cost of procuring reactive
power as auxiliary service and the losses of active power. The
proposed model is solved by Genetic algorithm to obtain the
best procurement strategy of reactive power as auxiliary
service. Lastly, some numerical tests are given to verify the
proposed model and algorithm correction and effectiveness.
Index Terms -- Power market, reactive power ancillary
service, optimal power flow, genetic algorithm
I. INTRODUCTION
N power markets, abounding reactive power is a very
I important ancillary service that ensures the power
system to operate safely and stably. In the power market
situated unbundling generation market, independent
system operator (ISO) must satisfy the demand of reactive
power loads and support the voltage of power system by
controlling reactive power and voltage to ensure the
security and stability of system. Generally, the reactive
power and voltage are controlled by regulating the output
of reactive power resources and the ratio of transformers.
Reactive power resources include generators and all kinds
of reactive compensation devices, such as synchronous
condenser, shunt capacitor and SVC. As important
reactive resources, generators generally belong to
generation companies, which operate separated from
system. So how to make them join the competitive market
of reactive power actively becomes a very important issue.
For reactive power equipments that belong to the power
grid company, there is also a question of reclaiming their
cost. The power grid company must cany through
This work was supported in part by Foundation for University Key the needed reactive power. Because IS0 cannot know
Teacher, the State Education Ministry of China under Grant
GG-470-10079-1001.
Li Gengyin, Zhou Ming, Yang Juan and Sun Liying are with the
School of Electrical Engineering, North China Electric Power University,
Baoding 071003, Hebei, P.R.China (e-mail: ligy@ncepu.edu.cn,
zhouming@ncepu.edu.cn).
0-7803-8237-4/04/$17.0002004IEEE
349
reasonable optimized dispatching to control reactive
power and voltage, that is to say at the same time of
ensuring abounding reactive power, the power grid
company must reduce power losses and expenditure of
reactive power ancillary services.
Hao analyzed reactive power service from two sides of
economy and technology, and proposed a method to
calculate the cost of reactive power capacity [l]. Dai used
different objectives to observe reactive power prices under
different OPF models and adopted different system
operation conditions to observe how these conditions to
affect reactive power prices [2]. Lamont analyzed the cost
of different reactive power resources elaborately [3].
Zhang presented a method of generation reactive power
prices to compensate reactive power generation cost by
analyzing the cost of generator’s reactive power services
[4]. Fang proposed a method of dynamic reactive power
procurement considering cost and resource value of
reactive power [ 5 ] . Bhattacharya proposed a reactive
bidding structure in the context of reactive power market
and the method for I S 0 to procure reactive power contract
[6]. However, how to procure enough reactive power
economically and reasonably in ancillary services needs to
be more researched.
Based on analysis of generators’ production cost of
reactive power, this paper firstly proposes a segmented
bidding model of generators’ reactive power generation,
then provides a dispatching reactive power model in
reactive power ancillary services, which considers both the
active power losses and the production characters of all
kinds of devices regulating reactive power and voltage.
Lastly, the method to solve this model by Genetic
algorithm is introduced, and some numerical tests are
calculated and analyzed.
11. REACTIVE POWER BIDDINGMODELOF GENERATORS
After the active power’s trade, IS0 operates the market
of reactive power ancillary service according to the quoted
price for reactive power of each generator unit and
coordinates the reactive compensation devices and
transformers belonged to power grid company to procure
exactly the reactive power generation cost of generator
units, based on general characters of reactive power
generation cost, this paper proposes the reactive power
segmented bidding model of generator units, that is to say,
generator units join the reactive power market by bidding.
2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong

The reactive power generation costs of generator units

are composed of investment cost, opportunity cost and
operation and maintenance cost. The investment cost is
reactive power capacity cost of generator units, and the
opportunity cost equals to the reduced active power
income because of the increased reactive power. The
operation and maintenance cost aims mainly that when
generator operates in leading phase, the temperature of the
stator head increases, and the range of steady stability
decreases, so the operators should strengthen the
management of equipments, and this part of expenses
Qi
lo Reactive output, Qgz
should be compensated. Fig. 2. Reactive power bidding curve of generator units
When generators in operating, the constraints of the
stator winding temperature, the excitation winding and L2 compensates the investment cost and opportunity
temperature, the power of prime move, the temperature of cost of reactive power and operation in leading phase.
stator head in leading phase and the stability in parallel
compose the operation limit diagram of generator units, as
shown in Fig. 1. The operation point of generator is
limited within the area of A-N-H-D.

The bidding model can encourage generator traders to

join bidding of reactive power and make them reclaim
their cost reasonably and take part in reactive power
market positively, in order to make system get enough
reactive power resources and satisfy the demand of
reactive power load and provide voltage support. For a
given unit, Aqo should have a fixed value, because the
investment cost of reactive power is lower oppositely, Aqo
can be prescribed maximal value to prevent gamble
Fig. I . Operation limit diagram of generator units
behaviors of generator traders and ensure the stability of
Suppose that one generator unit gets Po active power by reactive power market.
bidding, when the generator operates in area 0-K-N-B-C, Under the condition of invariable active power,
the active power will not decrease when the reactive reactive power's regulation of generator is an effective
power increases, so the reactive power cost mainly way to regulate voltage, which need not have extra
included investment cost. When the generator operates in expenditure, so describing A,, as a lesser value is not only
area C-B-A, it has to reduce its active power in order to accord with the characters of reactive power's generation
increase reactive power, so the reactive power cost should but also can make system procure more reactive power
include investment cost and reduced active power income. from generator units; not only can make generator units
When operates in area 0-K-H-F-E, the generator is in reclaim their cost of reactive power but also decrease
leading phase, so the reactive power cost should include expenditure of reactive power ancillary services
investment cost and operation fare for leading phase. In effectively, and accordingly decrease the reactive power
the same way, when the generator operates in area D-F-E, expenditure that users bear, utilize resources adequately,
the reactive power cost must include investment cost, to realize maximal social benefits.
opportunity cost and operation fare for leading phase.
Based on above analysis, the reactive power bidding 111. MATHEMATIC MODELOF PROCURING REACTIVE
curve of generator units is put forward shown in Fig.2, the POWER AS AUXILIARY SERVICE
corresponding reactive power bidding model is shown in
A . Objective Function
(1). Qmx, emin, Ql, Q2 in Fig.2 corresponds to the
The objective of purchasing reactive power ancillary
corresponding value in Fig. 1 respectively. Aq0
compensated the reactive power investment cost of services is mainly to minimize expenditure paid to
generator, corresponding to the capacity price of reactive generator units, the losses of system, and the cost paid for
power, to encourage generator traders to invest reactive reactive power ancillary services. So, the following
power and ensure system haveing enough reactive power objective function is formulated:
resources. (lql-Aqo) compensates the expenditure for
generator in leading phase. Beeline L , compensates the
investment cost and opportunity cost of reactive power,

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2004 IEEE Intemational Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong

where Agi and Qgi are the bidding price and output of where Tlmin and T,,,,, are the minimal and maximal
reactive power of generator i respectively; C,, and Qcj are allowable range of ratio of OTLC (On Load Tap Changer)
the cost function and reactive power output of reactive respectively.
compensation equipment i; CT and AT, are the cost
function of adjustable ratio transformer I and the change of IV. GENETIC ALGORITHM BASEDSOLUTION METHOD
transformation ratio; Ng, N,, N/ are the number of The proposed model is a typical nonlinear problem
generator units, reactive compensation equipments and with many constraints, and the ratio of OTLC, used
transformers respectively; Pr and AL.are the losses and the capacity of shunt capacitor is dispersed variable, so it can
average price of active power of system. not be solved by normal optimizing method. Genetic
Which can be seen from above is that the objective algorithm is an adaptive, full-scale, optimizing full-scale
function includes three parts: the expenditure that system and probability searching algorithm [7]. Based on the rule
should paid to generator traders, the cost of reactive power of “natural selection, excellence success and failure
provided by system (including reactive power eliminate” during the period of biology evolution, firstly a
compensation equipments and transformers) and the series of individuals is generated, then evaluated by a
expenditure of active losses. Among of them the last two certain standard to realize excellence success and failure
parts are more simple: the cost expenditure of reactive eliminate, and then by a series of manipulation (selection,
compensation equipment is decided by system, which is crossover and mutation) to generate new individuals, then
mainly to reclaim the reactive investment of system. For put up genetic operations, time and again, until get the
reactive compensation equipment that belonged to system, best answer. Solving this model by genetic algorithm
the cost per unit should be converted corresponding to the mainly includes coding, selection of fitness function and
investment cost, natural life and utilize probability. For crossover and mutation and so on.
transformers, it will reduce its natural life if operates
continually, so may convert to the cost for every A . Coding
regulation. The expenditure of losses should be calculated General method of coding in genetic algorithm is
according to the losses and the price of losses. binary and decimal system. Main merit of binary system is
that it is convenient to realize crossover and mutation
B. Constraints manipulation and so on and has good searching ability, but
I) Constraint of Power Balance: towards optimized problem with high precision and
continuous function, the length of coding cluster is hard to
decide, because too short length is difficult to satisfy the
demand of precision and too long length will reduce the
where PG,QGand Po,QD are the output and load of active velocity and capability of algorithm. So discrete variable
and reactive power respectively; PL and QL are the losses in this model such as the ratio of OTLC, the used capacity
of active and reactive power of system respectively. of shunt capacitor and so on, is coded with binary system;
2) Constraint of Generator’s Output: but the bus voltages of generators are coded with
numerical system.
(4)
B. Disposal to Constraints and Selection of Fitness Function
where P,,, and PgrmaX are the minimal and maximal active In this model, balances of power and constraints of
output of generators respectively; Q,,,,,,, and Q,,, are the generators’ output, constraints of shunt capacitor output
minimal and maximal reactive output of generatos and nodal voltage of generator have been considered in
respectively. coding, and other inequality constraints (nodal voltages)
are involved in objective function to inform generalized
3) Constraint of Nodal Voltage:
Lagrange function, as shown in (8).
‘?mm 5 ‘? 5 V,max (5) ’V

where V,,,, and V,,,, are the minimal and maximal F = ~0 + C r =l

~ fmmi [max(o,(Kmm - V, 111’
allowable value of nodal voltage respectively. (8)
N
4) Constraint of Reactive Compensation Equipment s + C Pvr max [ma409 (v, - V, 111’
ma
Output: r=l
where Fo is the objective function of reactive power
Qmmm 5 Qcr 5 Qcrmax (6) ancillary services in (1); plqmax and pKmn
are the punishing
where Qcrmln,Qirmaxare the minimal and maximal factors of nodal voltage constraint respectively. The
allowable output of reactive compensation equipment i fitness function in this paper is
respectively. C. Selection Operation
Individuals are selected by tournament. Firstly two
individuals are selected from population randomly, and

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2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong

then the individual with bigger fitness value is selected as The range of nodal voltage and the voltage value before
the father individual of this generation. and after optimization are shown in Table I, and the
comparison of every kind of expenditure and whole
D. Crossover and Mutation Operation
expenditure before and after optimization are shown in
Selection of crossover probability P, and mutation Table 11. Which can be seen is that the demand of nodal
probability P, in genetic algorithm is the key to the voltage is satisfied and the active power losses and the
capability of algorithm. This paper utilizes adaptive expenditure of reactive power are reduced effectively after
crossover operation, which regulates P, based on the optimizing reactive power.
fitness value of individual. For the individual with bigger
fitness value, crossover them with smaller probability to TABLE I
prevent destroying good individual and on the contrary DATAOF IEEE 6 Bus SYSTEM
VOLTAGE
crossover them with higher value. And towards mutation
Generator buses Load buses
operation, the population is divided into several child
populations, while different P, is applied to different VI v2 v3 v4 v5 v6

populations to ensure the multiplicity of population. Minimum 1.000 1.100 0.9 0.9 0.9 0.9
Maximal 1.100 1.150 1.100 1.100 1.100 1.100
V. N ~ E R I C ATEST
L AND ANALYSIS Original 1.050 1.100 0.938 0.952 0.879 0.893
IEEE 6 bus test system is calculated and analyzed using Optimized 1.099 1.128 1.008 1.021 0.937 0.957
the proposed model solved by genetic algorithm. The
network diagram is shown in Fig. 3, which has 2 TABLE I1
generators lied in bus 1 and 2 respectively, 2 shunt COMPARISONOF &SULfS BEFORE AND AFTER OPTIMIZATION
capacitors lied in bus 3 and 4 respectively and 2 branches
of transformers connecting node 3 , 5 and node 4, 6. Original Optimized
The maximal value of output of shunt capacitor are 5.0, Value ExuenditureiWh) Value E x u e n d i W M )
5.5Mvar with prices of 2.0YIMvar.h. The Ranges of 0.940 0.0 0.940 0.0
Transformer T35
transformer ratios are [0.92, 1.081 and [0.925, 1.0751 Ratio4p.u.) T~~ 0.950 0.0 0.950 0.0
respectively, and the regalation lengths are 2% and 2.5%
respectively, while the cost corresponding to every change Reactive of QI 37.357 37.357 28.634 28.634

is supposed as 1O.OY. The reactive bidding models of the Generators/MVar Q2 35.063 35.063 27.934 27.934
two generators are shown in (9) and (10) respectively, and Reactiveof Q3 0.000 0.0 4.500 9.0
reactive power values are expressed in P.u.. And the price CondensedMVar od 0.000 0.0 5.500 11.0
of the losses is 20WMW.h.
Losses/MW 11.379 227.580 9.512 190.237
I-15Q,, + 0.4 - 0.2 5 Qgl 2 -0.08 Whole Fee/(Wh) 300.00 266.81

Fig.3 compares the influence of different objective

4Qgl-1.4 0.6 2 Qgl 5 1 fictions on reactive power cost. Which can be seen from
the figure is that utilizing the integrated model can gain
- l5Qlr2- 0.2 - 0.2 5 Qg25-0.12 benefit of decreasing losses and economy.
1.6 -0.122Qg2 1 0 (10) Which can be seen by calculating is that different
C, (e,,1= 1 0 < Qg250.8 reactive power bidding curve of generator units, price of
4Qg2 - 2.2 0.8 I Q,, 5 1 losses and cost of reactive power compensation equipment
and regulation of transformers have greater influence on
55.0+j13.0
the expenditure of reactive power ancillary services and
active power losses of system. Fig. 4 shows the influence
of transformer regulation cost on reactive power from
I 6
generators. Fig. 5 shows the influence of transformer
regulation cost on active power losses and total cost. Fig.
6 shows the influence of price for active power losses on
reactive power from generators. So considering these in
the model of reactive power ancillary services can
decrease the expenditure of reactive power ancillary
1 2 services, and then allocate the expenditure to users
1 reasonably (allocation of losses' expenditure should be
divided into active and reactive power loads) to reclaim
50.0+j5.0 30.0+jlX.O 50.1+j34.4
the cost of reactive power ancillary services.
Fig. 3. IEEE 6 bus test system diagram

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2004 IEEE Intemational Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong

400 ,
-5
t
A 550
#t original
300
250 Model of this paper at 264
.- v 266
200 Ignoring cost of generators
5 150
100 Ignoring Fee of Losses
50 only Fee of Losses
0
1 2 3 4

I-expenditure of reactive equipments

2-cost of transformers’ regulation
3-expenditure of active losses
256
254

Cost of Transformers’Regulation(Wtimes)
10 12

4-whole expenditure of reactive

Fig. 3. Influence of different objects on reactive power cost
Fig. 5. Influence of transformer regulation cost on active power
losses and total cost

40
h
m

E> 35-
8
5
E
M
c
30- -1
9
r:
34 Generator 2

0 25-
i
Q
------_Generator 1
6 20-
-Generator 2
” 28- ,. , -.-.......
, I
I

.+*
~

*.
-.
‘
I
. II
I5Y
10
0 2 4 6 8 10
Cost of Transformers’ Regulation @/times)

Fig. 4. Influence of transformer regulation cost on reactive power from

generators

VI. CONCLUSIONS
Based on the analysis to operation limit diagram of
generator units, this paper proposes a segmented bidding
model of generators’ reactive power generation which can
compensate the reactive power of generators reasonably
and improve their enthusiasm to join the reactive power
market. A dispatching reactive power model based on
OPF considering both the expenditure of losses and all
kinds of reactive power resources is proposed. This model
is useful for the electric company to reclaim investment VIII. BIOGRAPHIES
and ensure the system operates securely and economically.
Li Gengyin (M’2002) was bom in Hebei Province,
The numerical tests show that both the model and the
China, on May 18, 1964. He received the B.S., M.S
algorithm are reasonable and effective. and Ph.D degrees in power system and its
automation from North China Electnc Power
VII. REFERENCES University (NCEPU) in 1984, 1987 and 1996
respectively.
[ I ] Hao Shangyou, Papalexopoulos Alex, “Reactive power pricing and Since 1987, Dr Li has been wth the
management.” IEEE Transactions on Power Systems. vol. 12, no.4,
Department of Electncal Engineenng at NCEPU.
pp.95-103. Dec. 1997.
Now, he is a professor and deputy head of the
[2] Dai Yan, Ni Yixin, Wen Fushuan, Han Zhenxiang, “Analysis of Department. His research areas of interest include electricity market,
reactive power pricing under deregulation,” A u t o n d o n of Electric
power quality, analysis and control of power systems, and new
Power Svsteins, vol. 24, no. 5, pp.9-14, 53, May 2000.
transmission and distribution technologies
131 Lamont John W, Fu Jian, ‘Cost analysis of reactive power
support,” IEEE Transactions on Power Svstems, vol. 14, 110.3,
pp.890-897, Sep. 1999.

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2004 IEEE Intemational Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong

Zhou Ming was bom in Hubei Province, China, on

Nov. 24, 1967. She received the B.S. and M.S.
degrees in power system and its automation from
North China Electric Power University (NCEPU) in
1989 and 1992 respectively.
Since 1992, Ms. Zhou has been with the
Department of Electrical Engineering at NCEPU.
Now, she is an associate professor. Her areas of
interest include AI application to power system, electricity market, and
power system operation and management.

Yang Juan was bom in Jiangsu Province, China,

on April 1980. She received the B.S. degree in
mechanical engineering and management, and B.S.
degree in power system and its automation from
North China Electric Power University (NCEPU) in
2001.
Since 2001, Miss Yang has been studying the
master’s degree at the department of power
engineering of NCEPU. Her research area of
interest is power market.

Sun Liying was bom in Heilongliang Province,

China, on Nov 4, 1978. She received the B S
degree in power system and its automation from
North China Electric Power University (NCEPU) in
2001.
, -. -.
L I
Since 2001, Miss Sun has been studying the
master’s degree at the department of power
engineenng of NCEPU. Her research area of
interest is power market.

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