Reactive power cost allocation by using a value-based approach

This study proposes a value-based approach to allocate the cost of reactive power production/absorption and the useful VAr reserve provided by the generators. Reactive power support can be segregated into two broad categories: the utilised component of the support and the reactive power reserve component for system security. The utilised reactive power capacity can be decomposed further into the support required for meeting the reactive power loads and that required to meet additional reactive power transmission losses for the MW load shipment. A value-based sensitivity approach has been utilised to compute utilisation factors (UFs) for allocation of the cost of reactive power production/absorption and reserve provision. This method provides transparency in determining the relative utilisation and supply of reactive power by sources to the customers. System operator (SO) can utilise this method for allocation of the cost incurred by the reactive power providers to the load serving entities. Case studies on five-bus test system, IEEE 24-bus reliability test system (RTS) and 75-bus Indian system demonstrate the proposed approach.