Leverage Reactive Power Ancillary Service Under High Penetration of Renewable Energies: An Incentive-Compatible Obligation-Based Market Mechanism

Power systems are undergoing fundamental changes with increasing penetration of renewable energies. A reactive power ancillary service market is of significance to incentivize private providers, such as thermal power units and renewable power plants (RPPs), to participate in maintaining voltage security. Because of the local nature of reactive power, one of the recognized issues is that monopolistic participants may have great market power and strategically manipulate their costs. To pursue economic efficiency, this paper proposes an incentive-compatible mechanism based on Vickery-Clarke-Groves (VCG) auctions for the day-ahead reactive power ancillary service market. The obligations of reactive power ancillary service are quantified in the VCG-based market mechanism. Depending on the expected performance of participants compared with the corresponding obligations, payments are obtained for thermal power units, RPPs, and loads. Hence, providers have the incentive to declare their true costs and undertake obligations. Furthermore, a scarcity price is employed to reward the provision of scarce reactive power resources and ensure reliable market clearing. The proposed mechanism is illustrated using the IEEE 24-bus and 118-bus systems. The results verify the effectiveness of the proposed mechanism. Moreover, high rewards or penalties are observed for voltage weak areas, thereby inducing appropriate investments in reactive power capacities.