Reactive power cost characteristics for synchronous generator in deregulated electricity markets

The accurate quantification of reactive power price is essential in the competitive electricity markets. The cost characteristics must be able to recover the lost opportunity cost component of generator reaching the field limits and causes the decrease in its active power when the reactive demand in the system increases and is met by the generator. The Synchronous condensers supply reactive power to maintain the voltage and reduce the burden on the synchronous generators. The ISO procure reactive power as an ancillary service provider from the synchronous condensers and these should be remunerated according to their reactive power supply to the system. In this paper, the cost characteristics for reactive power of the synchronous generator and condenser have been formulated. The cost of reactive power for synchronous generator has been formulated based on its capability chart and for synchronous condenser has been obtained based on its capital cost and fuel cost consumption. The analysis has been carried out for IEEE 14 bus test system considering (i) increase in reactive load, (ii) increase in reactive demand limit, (iii) operating power factor variation. The results have also been compared with the triangular method and lost opportunity cost method.