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This paper proposes a two-level framework for the operation of a competitive market for reactive power ancillary services. It is argued that the first-level, i.e., reactive power procurement, be on a seasonal basis while the second-level, i.e., reactive power dispatch, be close to real-time operation. To this effect, a reactive power procurement market model is proposed here taking into consideration system security aspects. This procurement procedure is based on a two-step optimization model. First, the marginal benefits of reactive power supply from each provider with respect to system security are obtained by solving an optimal power flow (OPF) that maximizes system loadability subject to transmission security constraints imposed by voltage limits, thermal limits, and stability limits. Second, the selected set of generators is then determined by solving an OPF-based auction to maximize a societal advantage function comprising generators' offers and their corresponding marginal benefits with respect to system security, considering all transmission system constraints. The proposed procedure yields the selected set of generators and zonal price components, which would form the basis for seasonal contracts between the system operator and the selected reactive power service providers.
Date of Publication: Feb. 2008