Comprehensive model for simultaneous pricing of active and reactive power based on marginal cost theory

In this paper, a comprehensive problem for calculating active and reactive spot prices based on short run marginal cost theory is presented. In order to calculate marginal costs, an optimal power flow, including objective function and constraints, is solved, that is real and reactive power dispatch so as to minimize total operating cost of utilities, subject to the operational constraints. The goal of this paper is to complete the formulations which were proposed in literature. Therefore, the formulation adopts a synchronous generators steady-state model with nonlinear reactive power limits and two kinds of load modeling. The model is solved for five-bus and IEEE 30-bus test systems using the high-level programming platform GAMS and nonlinear programming solver MINOS. Furthermore, the effects of network constraints and power market parameters such as profit rate, on the marginal prices, have been investigated in detail.