Reactive power markets: A possible future?

Reliability issues in the wake of major blackouts have spurred a discussion on the development of reactive power markets. In the 2003 North American blackout, reactive power deficiency was identified as one of the causes for the propagation of the blackout. This event to an extent motivated the federal electricity regulatory committee (FERC) to explore the idea of reactive power markets. This paper investigates the need of reactive power in the system, the present compensatory structures and the new market structures suggested in literature. A survey of the present practices regarding compensation of reactive power and the associated drawbacks has been presented. In addition, the paper also analyses the possible challenges associated with implementation of competitive market structures as envisaged by FERC.