Electrical Power and Energy Systems 28 (2006) 127132 www.elsevier.

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A novel market-based reactive power management scheme

X.J. Lin *, C.W. Yu, A.K. David, C.Y. Chung, H. Wu, N. Xu
Department of Electrical Engineering, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, China Received 22 April 2004; received in revised form 26 September 2005; accepted 10 November 2005

Abstract Deeper deregulation in power supply industry has made reactive power ancillary service management a critical task to power system operators from both technical and economic perspectives. This paper proposes a practical market-based reactive power ancillary service management scheme to tackle the challenge. Reactive power ancillary service procurement and settlement issues are addressed in the paper. Least cost solution is applied to ensure optimal reactive power dispatch when procuring reactive power support. The total minimum reactive cost is separated into two components: one is assigned to the generation side while the other to the loading side. Cost responsibility of the loading side is recovered from reactive power charge of the reactive loads taking the amount of reactive power and location into account. On the other hand, cost responsibility of the generation side is equitably allocated to generators according to their different obligations of providing reactive power to support their own active power delivery in a transmission grid. Reactive power cost compensation to a generator is based on the incurred cost of its reactive power contribution less the cost of its obligation to support the active power delivery. Reactive OPF formulation is developed as an analysis tool and the validity of the proposed scheme is examined using a modied IEEE 14-bus system. q 2005 Elsevier Ltd. All rights reserved.
Keywords: Reactive power ancillary service management; Power systems deregulation; OPF

1. Introduction Reactive power support plays an important role to support real energy transfer by maintaining system voltages within proper limits. In the vertically integrated electricity industry, the costs of reactive power support are included in the bundled electricity prices that retail customers paid. There are no economic signals for reactive services and reactive power support is determined by operators judgments. This practice is not suitable for the new power markets characterized by the separation of generation, transmission and distribution where incurred costs of different reactive power suppliers should be precisely identied and properly compensated. Independent system operator, as the power market facilitator, is responsible for coordinating reactive power service from generation and transmission facilities. Reactive power support from generation facilities is commonly dened as reactive power ancillary service and the relevant costs should be recovered from certain kind of ancillary service charge while the reactive support costs related to transmission facilities are remunerated from
* Corresponding author. Tel.: C852 27666143; fax: C852 23301544. E-mail address: 01902030r@polyu.edu.hk (X.J. Lin).

0142-0615/$ - see front matter q 2005 Elsevier Ltd. All rights reserved. doi:10.1016/j.ijepes.2005.11.007

transmission charge. This paper focuses on the issues related to reactive power ancillary service procurement and pricing in competitive power market environments. Considerable research has been done in this area since 1990s. One way of reactive power ancillary service management is based on marginal cost theory. Early attempt of this approach similar to real power spot price theory [1] can be found in [2]. Li and David proposed a modied AC OPF model for reactive power wheeling rates analysis [3,4]. Decoupled OPF model was proposed for reactive pricing in [5]. In-depth theoretic discussions on applying marginal cost concept for real time reactive power pricing was provided in [6]. Detailed cost models of reactive power support can be found in [7] and a similar approach based on the opportunity cost of generator reactive power dispatch was adopted in [8]. Bhattacharya and Zhong constructed a reactive bid curve of generator in [9] and further develop a competitive market mechanism based on it in [10]. However, as pointed out in [11,12], the application of marginal reactive price is not very practical due to its volatile and erratic behaviors. With these considerations cost-based reactive power pricing and management methods were proposed in [1113]. However, there are two drawbacks in their proposed approaches, namely technical signals but not economic signals are used to determine generators reactive power obligation and only reactive power amount, without considering the effects of the loading location on the costs,

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is used to charge reactive loads. As a result economic effectiveness is deteriorated. This paper proposes a new practical market approach to manage reactive support from reactive power supplying facilities including generators with real power output and reactive compensators. In the paper reactive compensators, assumed as assets of private investors, are treated as independent reactive suppliers. This paper is organized as follows: cost models of these two sources are rstly reviewed. Optimal reactive power dispatch is obtained with the objective of minimizing reactive support cost. Then, a pricing structure including compensation to reactive sources and charge of reactive consumers is established with both technical feasibility and economic equitability taken into account. The idea of reactive cost responsibility separation is applied to reactive cost settlement. The total reactive cost is separated into two components. One component is for supporting real power transfer while another component is for the loading side reactive power consumption. The rst component of cost, which is considered as an obligation of the generation side, is allocated to different generators according to their corresponding real power participation factor. This factor is determined by the cost saving when there were no such real power selling. It means that a generator is not only a supplier of reactive power but is also a consumer of it. Compensation to a generator is the difference between the incurred cost of its reactive power contribution and the cost of its reactive power obligation for supporting real power transportation. The second component is recovered from load reactive charge, which is based on its reactive power quantity and the effects of the loading location on the cost. In this paper ISO, as a facilitator of reactive service, assures the total compensations to reactive suppliers equal to the revenues from the reactive power consumers. Finally, the simulation results on a modied IEEE 14 bus test system are presented. 2. Cost analysis of reactive power Reactive cost models of generators with real power outputs and reactive compensators are reviewed in this section. They are considered as reactive ancillary service providers and will be incorporated in the reactive pricing structure. 2.1. Reactive cost of generators Generators provide reactive support by producing or consuming reactive power when operating at lagging or leading power factors, respectively. Unlike fuel costs that represent the operating cost of active power production there is only a small operating cost in the case of reactive power production and can normally be ignored. Hence, this paper only considers the opportunity cost of generator reactive power production as modeled in [8]. The opportunity cost of using a resource for a certain purpose is dened as the benet lost for not using it in an alternative way. For example when a generator produces more reactive power, it has to reduce its active power production because of capacity constraints which

will in turn reduce the opportunity of obtaining prots from an active power market. The prot of reduced active power production (implicit nancial loss to generator) is modeled as the reactive power opportunity cost. The accurate model of such opportunity cost should be derived from the generator capacity curve which is also called the loading capability diagram. Opportunity cost also depends on the real time balance between demand and supply in the market and it may not be straightforward to determine its exact value. Here, the following simple model for opportunity cost is used: h qi 2 Cgqi Qgi Z Cgpi Sgi max KCgpi kgi S2 gi max KQgi (1)

where Qgi is the reactive power output of generator gi, Sgi max is the maximum apparent power of generator gi, Cgpi is the active power cost which is modeled as a quadratic function (Cgpi Pgi Z aP2 gi C bPgi C c where Pgi is the active power output of gi; a, b and c are cost coefcients); kgi is an assumed prot rate for active power generation at bus i. 2.2. Cost of reactive compensators The charge for using reactive compensators is assumed proportional to the amount of the reactive power purchased and can be expressed as: Ccj Qcj Z rj Qcj (2)

where rj and Qcj are the reactive cost and the amount purchased, respectively, at location j. The production cost of a compensator is assumed as its capital investment return, which can be expressed as its depreciation rate. For example, if the investment cost of a reactive compensator is $6200/MVAr, and its average working rate and life span are 2/3 and 30 years, respectively, the cost or depreciation rate of the compensator can be calculated as: rj Z investment cost=operating hours Z $6200=30 ! 365 ! 24 ! 2=3 Z $0:0354=MVAr h

2.3. Limitations of the model The model described above is correct only if it is assumed that use of static compensator entails a charge of this nature and if the opportunity cost of reactive output from generators is non-zero. The former implies that reactive compensators integrated into the transmission system are not included in Eq. (2) since their costs are included in use-of-system transmission charges. The latter is, strictly speaking, nonzero only for a generator on its MVA limit since; in this case, additional MVAr loading entails some MW reduction. These renements are not incorporated in the model though it is possible to do so at the cost of some mathematical and algorithmic complexity.

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3. Reactive ancillary service procurement The presence of adequate reactive power support and voltage regulation services is necessary to enable securing transactions of active power. In the deregulated structure of the electricity industries, the competitive provision of reactive power raises the need to optimally allocate reactive requirements among existing plants. The purpose of reactive power dispatch is to determine the proper amount and location of reactive support in order to maintain a proper voltage prole and voltage stability requirement. 3.1. Reactive optimization model 3.1.1. Objective X X Min CQ Z Cgqi Qgi C C ci Q ci
i2NG i2NC

3.1.3. Reactive OPF outputs The solution of the above reactive OPF formulation from , Eqs. (3)(10) includes minimum reactive support cost CQ reactive power amounts Qgi ; Qci purchased from different suppliers and their incurred costs Cg qi ; Cci . The Lagrange multipliers lLi of the reactive power load equality constraints can also be obtained which will be used for evaluating load reactive charge as described in Section 4. 3.2. SQP method The reactive OPF model formulated in Section 3.1 is a nonlinear programming (NLP) problem. There is no general method to solve the NLP problem. The paper adopts the sequential quadratic programming (SQP) method [14] which has been developed recently. The SQP method transfers the original NLP problem to sequential QP (Quadratic Programming) subproblems. Through iterations, the solution for the original problem will be gradually reached. For the following standard form of NLP problem: Min f x subject to : gi x Z 0; hi x % 0; i Z 1; 2; . ; p i Z 1; 2; . ; m ! (11)

(3)

where CQ is the total reactive support cost from generators and reactive compensators; NG is the set of all generator buses and NC is the set of all reactive compensator buses. 3.1.2. Constraints In the reactive power cost optimization, the active power output of generators is specied. The bus voltage, the reactive power output of generators and compensators are the control variables. The equality and inequality constraints, including the load ow equations, reactive power output of generators and compensators and the bus voltage limits in normal operating condition, are listed in (4)(10).   X    Vj Yij cosqij C dj Kdi Pg i Z  Vi  (4)
j2N

The SQP algorithm can be briey illustrated as: 1. Set kZ0. Choose a starting point x0. 2. Set up and solve the following QP sub-problem for direction d 1 Min Vf xk T d C dT d 2 subject to : gi xk C Vgi xk T d Z 0; hi xk C Vhi xk T d % 0; i Z 1 ; 2; . ; p i Z 1; 2; . ; m !

  X    Vj Yij cosqij C dj Kdi K PLi Z Vi 

j2N

(5)

  X    Vj Yij sinqij C dj Kdi Qgi Z Vi 

j2N

(6) 3. Set the new point as: xkC1 Z xk C d. 4. If kdk % 3 (a small number), stop. Otherwise, set kZkC1 and go to step 2.

  X    Vj Yij sinqij C dj Kdi Qci KQLi Z Vi 

j2N

(7)

  Vi;min % Vi  % Vi;max Qgi;min % Qgi % Qgi;max Qci;min % Qci % Qci;max

(8) (9) (10)

4. Reactive pricing scheme A novel pricing scheme for reactive power is presented in this section. The scheme is comprised of ve steps based on the proposed reactive responsibility identications. Step 1: Reactive power support cost responsibility separation. The total reactive power cost is divided into two components, namely the generators side and the loads side. The duty cost of the generators side CG (i.e. the reactive cost to support the delivery of active power) is calculated as the optimal value of Eq. (3) when the system has no reactive loads. To evaluate this cost, the power factors of all the loads are set to unity. This component of cost is caused only by real power

where N is the total number of buses in the system; PLi and QLi are the specied active and reactive demand at load bus i; Yij :qij is the element of the admittance matrix; Vi Z Vi :di is the bus voltage at bus i; Vi;min and Vi;max are the lower and upper limits of bus voltage; Qgi;min and Qgi;max are the lower and upper limits of reactive power output of the generator; and Qci;min and Qci;max are the lower and upper limits of reactive power output of the compensators.

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X.J. Lin et al. / Electrical Power and Energy Systems 28 (2006) 127132 Table 3 Transmission lines data From 1 1 2 2 2 3 4 4 4 5 5 7 8 8 9 10 12 To 2 6 5 6 14 7 11 12 13 6 14 9 9 13 10 11 13 Resistance (p.u.) 0.04699 0.06701 0.05695 0.05811 0.01938 0.00000 0.09498 0.12291 0.06615 0.01335 0.05403 0.00000 0.12711 0.17093 0.03181 0.08205 0.22092 Reactance (p.u.) 0.19797 0.17103 0.17388 0.17632 0.05917 0.17615 0.19890 0.25581 0.13027 0.34802 0.22304 0.11001 0.27038 0.34802 0.0845 0.19207 0.19988 Susceptance (p.u.) K0.002 K0.002 K0.002 K0.002 K0.002 0.000 0.000 0.000 0.000 K0.002 K0.002 0.000 0.000 0.000 0.000 0.000 0.000

Fig. 1. Reactive management process diagram.

Table 4 Transformers data From 4 7 9 To 5 6 6 Resistance (p.u.) 0.0000 0.0000 0.0000 Reactance (p.u.) 0.25202 0.20912 0.55618 Ratio (p.u.) 0.932 0.978 0.969

Fig. 2. Modied 14-bus system conguration.

transportation. The remaining cost CL Z CQ KCG is assigned to reactive loads. Step 2: Equitable allocation of CG to generators. In this step, the power factors of all loads are kept at unity. Due to various location and real power output of generators, their respective reactive power requirements are different. Cost saving concept is introduced here for equitable allocation of CG to generators. The cost saving Sgi of the ith generator is dened as the difference between CPgiZ0 and CG Sgi Z CG KCPgiZ0 where CPgiZ0 is the optimal value of Eq. (3) when Pgi is set to zero. The more the cost saving is, the more the reactive power requirement

of the corresponding generator. It should be noted that the total loads need to be cut the same amount as Pgi when Eq. (3) is solved under this condition. This paper uses a simple way to distribute it to different P loads. The jth load decrease is expressed as DPLj Z PLj = PLj Pgi . After the same process has been applied to all the other generators, the cost allocation factor for the ith P generator is calculated as hgi Z Sgi = Sgi . The duty cost of the ith generator can be expressed as Dgi Z hgi CG . Step3: Payment to generators Rgi .
Table 5 Loads data Bus 5 number Real 0.076 load (p.u.) Reactive 0.016 load (p.u.) 6 0.478 8 0.150 9 0.595 10 0.090 11 0.035 12 0.066 13 0.150

Table 1 Generators data Generator number Maximum apparent power (p.u.) Active power output (p.u.) Reactive power limit (p.u.) Prot rate (p.u.) Active power cost function ($/h) Table 2 Depreciation rate of compensators Bus number Maximum capacity (p.u.) Depreciation coefcients ($/MVAr h) 3 0.3 0.10 4 0.3 0.10 G1 0.9 0.74 [K0.5, 0.4] 0.07 45 C 750Pi C 450P2 i G2 0.9 0.6 [K0.4, 0.5] 0.07

0.039

0.05

0.024

0.058

0.018

0.016

0.058

Table 6 Optimum reactive power dispatch Operating condition Base case QLiZ0.0 QLiZ0.0 and Pg1Z0.0 QLiZ0.0 and Pg2Z0.0 Reactive power output (p.u.) G1 0.086 0.082 0.016 0.037 G2 0.086 0.082 0.016 0.036 IC3 0.128 0.001 0.00 0.00 IC4 0.157 0.00 0.00 0.00 Reactive cost ($/h)
Z 3:760 CQ CGZ0.893 Cpg1Z0.0Z0.03

Cpg2Z0.0Z0.163

X.J. Lin et al. / Electrical Power and Energy Systems 28 (2006) 127132 Table 7 Reactive load charges Bus number Lagrange multiplier associated with reactive load Charge ($/h) 5 105.164 0.166 6 105.617 0.405 8 104.231 0.514 9 106.285 0.251 10 105.681 0.602 11 105.728 0.187 12 103.289 0.163 13 101.789 0.579

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The payment to the ith generator is the difference between the actual incurred cost of its reactive power contribution and its allocated duty cost for active power transportation:
Rgi Z Cg qi KDgi

(12)

Step4: Charge of reactive loads WLi . l Q WLi Z P Li Li CL lLi QLi (13)

The charge has taken the effects of the loading location and the amount of reactive power into account. Step 5: Payment to independent reactive sources Rci . The payment to an independent reactive power source i, which has no participation in active power market, should be equal to its incurred cost, Rci Z Cc i. Integrating the procurement model and these settlement steps, the whole process of reactive power management is depicted in Fig. 1. Block 0 in Fig. 1 refers to the reactive power procurement process described in Section 3 while block 1 to block 5 refer to steps 15 of the pricing scheme outlined above.

5. Simulation results A modied IEEE 14-Bus system [15] shown in Fig. 2 is used for computer simulation studies. A feature of the system is a large power transfers from the top area to the bottom area over a long transmission distance. This makes it appropriate to study reactive power and voltage problems and hence it is adopted in the paper for illustration purpose. The system has three generators, 14 buses and 20 tie lines. Two independent reactive compensators, IC3 and IC4, are located at bus 3 and bus 4, respectively. Bus 14 is selected as slack bus and designated to make good transmission loss changes and its reactive power cost is not included in the optimization procedure. The system base capacity is 100 MVA. Table 1 provides generators, G1 and G2, data which are used for reactive power opportunity cost analysis. Capacity and depreciation coefcient of reactive compensators are listed in Table 2. Transmission lines data,
Table 8 Payment to generators and reactive compensators Cost of real power transport duty ($/h) G1 G2 IC3 IC4 0.490 0.403 Cost of reactive contribution ($/h) 0.450 0.450 1.287 1.571 Payment ($/h) K0.04 0.047 1.287 1.571

transformers data, and loads data are given in Tables 35, respectively. The optimization process described in Sections 3 and 4 are executed for four different cases and the corresponding generator reactive outputs and system reactive power costs are listed in Table 6. From the reactive costs in the last column of Table 6, the cost allocation factors of the generators can easily be obtained as hg1 Z 0:550:55, hg2 Z 0:45. Generator G1 is responsible for 55% of CG while G2 is responsible for the remaining. The cost duty of loads can also be calculated as 2.867 ($/h). The Lagrange multipliers associated with reactive loads (in base case) and reactive charges of reactive power loads are provided in Table 7. The Lagrange multipliers in the second row of the table reveal different effects of reactive loads at different locations on reactive support requirements. They are marginal costs of the reactive loads at different buses. With the values of these multipliers Eq. (6) is used to calculate the reactive load charges as shown in the third row of the table. Payment to generators and reactive compensators are given in Table 8. Reactive compensators receive all their reactive power support costs. For real power sellers, only part of the reactive power support cost will be compensated. It should be noted that payment to generator G1 is negative because the cost of reactive support provided by G1 is smaller than the reactive cost of supporting real power transportation allocated to it. In other words G1 has to pay ISO for its real power selling. It can also be observed from Table 8 that a rather high percentage of reactive charge is used to compensate independent reactive compensators in this case. 6. Conclusions This paper presents a novel cost based mechanism for reactive power management. A modied reactive OPF program is developed to solve the optimal reactive dispatch problem. Reactive responsibilities are equitably shared and priced. The total reactive support cost is separated into generators duty and loadings duty. Cost duty on the generation side is allocated to real power sellers by evaluating their reactive power requirement for real power transportation. The method of evaluation adopted in this paper has a common basis for every market participant and hence it is consistent and equitable. Each generator will be paid according to the difference between its actual incurred cost of contributing of reactive power support and its cost of reactive power requirement for real power selling. Charges of reactive load consider both location and the amount of reactive power demand. The theory and implementation is illustrated through a simple example. The results obtained illustrate that the proposed

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transparent reactive power management scheme is compatible with the new competitive market structure and economic efciency can be achieved. Acknowledgements Supports from the Research Committee of the Hong Kong Polytechnic University and Hong Kong Research Grants Council (grant number B-Q697) are gratefully acknowledged. References
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