Market Structure for Enabling Volt/Var Control in Australian Distribution Networks: A Practical Perspective

The proliferation of distributed generation (DG) poses new challenges in management of voltages in distribution networks. Excess generation by DG systems can cause voltage rise and reverse power flows, changing the paradigm of unidirectional power flow in distribution networks. Among many mitigation strategies, volt/var control methods that utilise inverter-interfaced DG systems to rectify voltage issues would be beneficial not only because DG system are typically located closer to customers, but the inverters can also provide fast response in contrast to mechanically operating volt/var control devices. As yet, DG owners only generate revenues from the production of active power while no incentives are provided for reactive power import/export, signifying the need for an update in the market structure to follow the growth of inverter-interfaced DG systems in distribution networks. This paper aims to propose an economic incentive scheme for utilising the full capacity of photovoltaic (PV) systems in Australian distribution networks. A `lost opportunity' market structure that considers non-unity power factor operation of PV inverters in volt/var control strategies is proposed. The results show that the proposed market structure can encourage participation of domestic PV systems in volt/var control by providing a win-win solution for all stakeholders in a distribution network.