Market price signals for customers for compensation of reactive power

Reactive power management is very important for solving of problems related to electricity production, transmission and consumption. It is well known that compensation of reactive power increases voltage, reduces power losses and saves fuel resources aimed to produce electricity. Compensation of reactive power makes lines and transformers be able to deliver more power without overloading the equipment that is to relieve transmission constraints. It is also well known that locational marginal price (LMP) for active power depend on energy price, power losses and transmission constraints components. Therefore, LMPs depend on the value of consumed reactive power. This research shows that LMP can be considered as price signals for consumers for compensation of reactive power. The compensation of reactive power results in a decrease of electricity cost and can be used by the consumer in order to control electricity prices.