A PRODUCTION COST MODEL FOR REACTIVE POW

In a restructured power market, maintaining the supply of reactive power is critical for voltage stability and power system reliability, necessitating its management by Independent System Operators (ISOs). This study aims to develop a production cost model that incorporates the reactive power pricing determined by generators. The methodology includes various approaches to derive the reactive power cost equation, analyzing real and reactive power within an optimal power flow framework. Among the methods presented, the triangular approach utilizes the generator's power factor for cost allocation, while both the real power-based and apparent power-based methods consider the opportunity cost associated with reactive power service. The practical applicability and validity of these methods are demonstrated through case studies based on the IEEE-14 bus power system model. Findings indicate effective strategies for pricing reactive power that can enhance the operational efficiency of electricity markets, thereby contributing to the stability during fluctuations in demand and supply. This research underscores the importance of establishing a fair pricing mechanism for reactive power to optimize market operations and incentivize the necessary support from generators.