2004 IEEE International Conference on Elecmc Utility Deregulation, Resmcturing and Power Technologies (DRPT2004) April 2004 Hong
Kong
The Optimization and Cost Recovery of the
Reactive Power in Power Market
X. Y. Xiao, J. Yang, and H. G. Yang
Abstract-This paper analyzed the unbundling of the spot
price, and discusses the theory of the spot price based
the LP decoupled model, which set the bases to the
following discussion. Because the spot price is nnctuant and
the merchandise surplus exists, the complexity of the
participation of the third part and the system operation is
greatly increased. It becomes important to express the
reactive cost if the reactive power electricity market is built.
The paper provides the method to get the corresponding
operation cost based on the analysis of SVC capacity
available factor in assigned years, which can cover the
investment cost completely.
Index Terms- Reactive power market, Short run
marginal cost, Optimization method, Unbundling of the
Spot price, LP deconpled model, Cost recovery
I. INTRODUCTION
U the market operation mode, electric utilities
must take account of system security and reliability,
and pay more attention to the economic henetit. The
active power market is more perfect comparatively than
the reactive power market in the system operation,
however, the reactive power can t play an ignorable role
in the transmission of active power, in particular, as
electric voltage become a bottleneck in the system
operation, the role of reactive power will he more
remarkable. In electricity market, how to reflect
scientifically and reasonably the economic operation of
The aulhorc are with the School of E l e ~ t r i ~ Engineering
d &
Information, Sichuan University, Chengdu, Sichuan, China, (e-mail:
niaoxianyosg@ 1?6.c001 or niaoxianyonga 163.com)
0-7803-8237-4104/$17.0002004IEEE
reactive source has turned into a problem resolved
imminently. At present, the studies on marginal cost of
on reactive power mainly focus on objective function for
optimizing reactive power based on the minimum
production cost of reactive source [1,2], however, these
methods haven t considered whether the real-time
pricing of reactive power for the operation cost of
reactive compensation is able to include all the
investment cost. In power system, the dispatchment of
reactive power should take account of both of the
operation security and economy, hence, this paper
regards the minimum loss of active power as optimal
object, through regulating the potential of generators,
switching reactive power sources, adjusting taps of
transformers and rearranging the distribution of reactive
power flow, in order to ensure a reasonable voltage level
in power grid, decrease transmission loss and give
attention to two things of the security and economy of
system operation, and on the basis of the above ,relating
capacity cost of reactive power with switch capacity and
time of reactive power support ,the investment cost of
reactive power is paid [3]. In this paper, we consider the
objective function based on the minimum loss, adopt
Linear Programming to compute the optimal reactive
power flow, elicit the corresponding operation cost based
on quantifying the capacity cost of SVC, and analyze
6-bus system to conclude a way that is how to pay the
cost of reactive power with loads and operations
changing within 5 years.
n. REGULATION OFREACTIVE POWER MARKET
Voltage is an important index in power quality, in
fact it is impossible that system ensure voltage of all
users to achieve the rated voltage every moment, hence,
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2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong
voltage deviation is inevitable, considering the
techno-economy, it must h e confined in a criterion range.
In order to ensure good voltage quality in system
operation, there must he enough reactive power supply,
allocate reasonably reactive power sources, and possibly
balance locally the reactive power that loads need. The
operating voltage level of the whole system depends on
the balance of reactive power. Besides generators, the
reactive power sources include compensating devices. At
present, SVC is more and more and shades into main
compensator, therefore we should firstly think over the
cost recovery of SVC cost while we investigate the cost
recovery of reactive cost.
nI. REACTIVE
POWER OPTIMIZATION AND ITS COST
RECOVERY
The objective function of optimizing reactive power
flow may he considered according to two aspects of
security and economy. Considering security, there are
several aspects: reducing the total injected reactive
power of power source, deviating the minimum rating of
voltage amplitude in each bus, and distributing equably
reactive reserve capacity in system [4]. And seen form
economy, the object aims at allaying active loss in
transmitting network. Among existing multitudinous
algorithms of Q-OPF [5,6], many investigators have
accepted the LP, however, most of the algorithms involve
in a problem of solving sensitivity matrix [7], and
repeatedly doing in each iterative process not only waste
time, but also be inefficient. Therefore this paper will
adopt a LP algorithm [SI of the optimal reactive
dispatchment, which neednR calculate the sensitivity
matrix and aim at the minimum loss, and altering the
reactive power of generators, switching some reactive
power sources, adjusting the taps of transformers, in the
condition of the node voltage beyond the limitation,
selecting proper constraints, we will obtain the minimum
loss and implement the security demands for voltage in
system.
In order to analyze the cost recovery that ancillary
service providers invest the compensators to meet locally
demands of reactive power in electricity market, hence,
the paper will only consider the reactive power of
generators and SVC, not taps of transformers,
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synchronous capacitors and static capacitors.
A. Optimization model of reactive power
Because the optimization for reactive power is based
on active power, except for the balance nodes, we
consider that the active injection of the others nodes of
generators and the active power and balancing active
power flow of transmission elements are constants.
I ) Variable in computing the optimization of reactive
powerflow
The variable in computing the optimal flow generally
is divided into state variable and controlled variable, if
the controlled variable is fixed, which can he adjusted
and controlled, we can obtain the state variable with the
computing of flow. In this paper, we won\t distinguish
them, the variables involve two aspects: voltage
amplitude of all the nodes; reactive value of SVC
adjusted continuously.
2) Objective function of optimal reactive powerflow
Regarding the loss of active power as the objective
function[S] and introducing the model of linear
increment, we can written in the mathematical form.
p r o =[Ll.[Av] (1)
In this formulation
AP,, --Loss increment of active power in power
network.
3 ) Constraint of equalir)' in optimal reactive power
Pow
In the paper, adopt the balancing equation of
reactive power in the basic flow equation, with the
equation of injecting reactive power, the optimizing
distribution of the optimal reactive power flow is
pi
In this formulation, ZQ,,
-branch flow from node i
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2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRF'T2004) April 2004 Hong Kong

to adjacent nodes, j f i. power capacity which is inputted each hour within five
Linearity Q,, the increment equation is years is
CCi(Qci)= 5 x 365 x 24x f, (1 1)
f. =Switch capacity of SVCx Used time/(Total capacity
By simplifying, the equation is of SVC x Total time) (12)
A Q = [J].[AV] (6) Q,, represents switch capacity of SVC, .
In this formulation,
Iv. ANALYZING
EXAPLES
J..
aQ. JXQq
=A=-
'' av, av, This paper analyzes a 6-bus system that contains three
nodes of generators and three nodes of loads. The system
model is as in Fig.1, where the reference capacity is
IOOMVA and the reference voltage is 230Kv. The
variables G1, G2 represent thermal generators and the
J =%=- variable G3 represents hydroelectricity generator. The
'I av, av, (7)
system parameters refer to the appendix. The restriction
for generator capacity refers to the tablel. We assume
that the situations of each load are the same, the
4 ) Constraint of inequaliry in optimal reactive power
incremental unit is 5% each year, the maximum load is
flow
I W + jsoand the minimum load ism+ j3oin the first year,

The connotation of the optimal flow contains the complexions of load refer to the table 2.
reliability and the power quality of system operation. The
variable of itself is foremost in an adjustable range and
the value of the function variable is also restricted after
computing power flow. In this paper, the adopted
inequality constraints are
The reactive power restriction of generator is
AQkGmin ~ A Q x G5 W k c m u kENG (8)
N C represents the sum of generators.
The reactive power restriction of SVC is
AQmcmin AQmc s AQacmar m E Ne (9)
N, represents the sum of compensating devices.
The restriction of node voltage is

AVi,,in < A V i <AVi,,, i=1.2 ,.... (10)

Fig.1 topology structure of a network

B. T H E COSTRECOVERY OF SVC

The cost of SVC is paid as depreciation rate of total

investment expenses [2](as every five years).
Assume that installation outlay is 116OOMvar and
use factor is f, ,thus the corresponding cost of reactive

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

TABLE I
THE ACTIVE AND REACTIVE CONSTRAINT OF GENERATORS

45.0 -10

TABLE I1
THE FIVE YEARS LOADS OFTHE SYSTEM

The SVC is installed at the node 5, whose
capacity is set temporarilyl50MVA and using time is
five years, and it can he adjusted continuously in a
range between OMV and 150MV and the limitation is
ascertained as the optimization consequence within
five years.
To simplify notation we will consider that
adequate-water-term and short-water-term balance
within a year, without medium-water-term, and peak
load stage and trough load stage is 12 hours each
other within a day, thus we will analyze four types of
operation modes which are combined. Firstly, we can
educe injecting capacity of SVC, then according to
the formulation (11). we can compute the utilization
efficiency for SVC annually and the average
utilization efficiency in five years, which is acted as
the annual use factor 0.61, eventually, we elicit a
design of the cost recovery for SVC, as in Table 3.

TABLE 111
THE COST RECOVERY WITHIN FIVE YEARS

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2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT7.004) April 2004 Hong Kong

of Electrical Engineer & Information, Sichuan University, China. His

Introducing the use factor 0.61 to the formulation
(1 I), the corresponding expenses of an injecting reactive
Dower unit in each hour within five vears is
11600
= 0.434 U /MVm.h (12)
5 x 365 x 2 4 ~ 0 . 6 1
Therefore, the corresponding cost of injection
capacity QCi of SVC is
Based on the analyzing, the total cost is 8526W and the
real cost recovery is 852600.lD within five years. We
can see that the design adopted to pay costs of reactive
power implements balance between income and
expenditure.
reesewch interests include power quality, electrical power market, and
power technology ecanornics.
Mr. Xiao is a member of the CIEE.
J. Yang is specializing in his muter's degree in Sichuan University,
Chengdu, Sichuan. China. His research interests include power market
and powerquality.
H.G Yang was bom in Chengdu, Sichuan. China. on October IO. 1949.
He rceceived the B.S. degree in electrical engineefing from Chengdu
University of S & T, China, and M.S. degree in electrical engineering
from Harbin Industry University. China, and Ph.D. degree in electrical
engineering from Belgium. in 1982. 1985, and 1997, respectively.
Since 2002, he has been a Professor in the School of Electrical
Engineer & Infomation, Sichuan University, China. His research
interests include p ~ w e quality
r and electrical power market.
Dr. Yang is a member of the CIEE.

V. CONCLUSIONS
This paper associates capacity cost with switch capacity
and time of reactive power, ascertains the cost recovery of
reactive power through optimizing reactive power in long
term, elicits an use factor of switching based on measuring
annual switch capacity and pays costs of SVC as 5-year
term, practical experience and theoretical analysis
demonstrate that the consequence is very good and the
proposed design is correct.

VI. ACKNOWLEDGMENT
The authors gratefully acknowledge the contributions of
S. L. Liu. A. D. Liu, and L. Li for their work on the
original version of this document.

VII. REFERENCES
John W., Lamont et al. Cost Analysis of Reactive Power Suppon,
IEEE Trans. On Power Sysiems, 1999,14(1), pp.890-898
Dai Yan, Ni Yixing, Reactive Power Pricing in the Power Markct.
Aumwtion of Elecrric Power Systems,Chinu. 2000,24(5),pp.9-14
Shangyou Hao, A h Papalexopoulos, Reactive Power Pricing and
Management, IEEE Trans. On Power Sy.wems, 1997, 12(1).
pp.95-I04
Eric Hobsan, Nctwork Constrained Reactive Power Control Using
L i n w Programming, IEEE Trwr. On Power SyTterns. PAS-990).
1980, pp.868-875
J a m s A. Momoh, M.E.Ei-Haw-, Rhmababu Adapa, A Review of
Selected O p t i d Power Flow Literature to 1993. P m I Nonlinez
and Quadratic Pmgnmming Approaches, IEEE Trans. On Power
Sysrems, 1999.14(1), pp.96-I04
Jams A. Momoh. M.E.Ei-Hawary. Ramahabu Adapa, A Review of
Selected O p t i d Power Flow Literature 10 1993, P m II: Newton.
L i n w Programming and Interior Point Methods, IEEE Trans. On
Por.erSy.~tems.1999,14(1), pp.105-Ill
Antonio G" Bmz Ep"a to , Jus e L . M i w z R a m et al.
Sensitivity-Based Reactive Power Control for Voltage Profile
Improvement. IEEE Truns. On Power Systems, 1993,8(3).
pp.937-945
El-Keib A.A., Ma X., Calculating of Short-Run Marginal Costs of
Active and Reactive Power Production. IEEE Trans. On Power
Systems. 1997. 1212). pp.559-565

VIII. BIOGRAPHIES
X. Y. Xiao was hom in Yi Bin. Sichuan, China, on October 19. 1968. He
received [he B.A.Sc. d e g m from the Chengdu University of Science &
technology, Chengdu. China, in 1990, and the M.S. dgree from Sichuan
University, Chengdu, Sichuan. China. in 1997.
Since 2000. Mr.Xiao has been an Associate Profcssor in the School

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