Optimal VAR procurement by ISO using VAR demand price curve considering market uncertainties

The level of reactive power ancillary services needed in a power system is traditionally settled by system operators (ISO) according to engineering criteria. This paper proposes a novel methodology to determine the optimum level of reactive power based on both engineering and economic criteria. With in the proposed approach a price-demand curve for the reactive power ancillary services is built. 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. This approach assumes that the provision of reactive power is made under a competitive market. In this market, the supply curve that collects the bids from generators providing reactive power is matched with the calculated elastic demand cost curve. The cross of the supply and demand curves determines the optimal level of reactive power and the price for provision of the service.