Reactive Power Pricing in Electricity Market

Reactive power pricing has always been essential for reliable & efficient system operation whether power market is regulated or deregulated. Since, the Nepalese power market is on the way of restructuring, the issue of reactive power pricing in Nepalese system is emerging. The aim of reactive power pricing is to encourage reactive power generation in the system providing the incentives for reactive sources according to their contribution to the system. The study proposes a capacity based reactive power pricing of reactive sources according to their contribution on voltage support & loss reduction contribution. Voltage sensitivity method has been used to evaluate the reactive sources. Generation Marginal Loss Sensitivity, Load Marginal Loss Sensitivity & Reactive Power Value (RPV) of sources with & without shunt capacitors has been calculated. It is found that Generation Marginal Loss Sensitivity for active & reactive loads without shunt capacitor is greater than that with shunt capacitor. Similarly, RPV of generators without shunt compensation is higher than that with shunt compensation which is obvious due to importance of reactive power in the absence of compensation.