Decentralized Reactive Power Compensation Using Nash Bargaining Solution

We consider a distributed reactive power compensation problem in a distribution network in which users locally generate reactive power using distributed generation units to contribute to the local voltage control. We model and analyze the interaction between one electric utility company and multiple users by using the Nash bargaining theory. On one hand, users determine the amount of active and reactive power generation for their distributed generation units. On the other hand, the electric utility company offers reimbursement for each user based on the amount of reactive power dispatched by that user. We first quantify the benefit for the electric utility company and users in the reactive power compensation problem. Then we derive the optimal solution for the active and reactive power generation, as well as reimbursement for each user under two different bargaining protocols, namely sequential bargaining and concurrent bargaining. Numerical results show that both the electric utility company and users benefit from the proposed decentralized reactive power compensation mechanism, and the overall system efficiency is improved.