Reactive power pricing [The Business Scene]

Reactive power is one of the least understood ancillary services in the competitive markets. Reactive power is necessary to balance the total demand with the least amount of power flowing in the transmission lines. The line limits and the line losses are a function of the total current, both the real and the imaginary. Minimal power factor correction at the demand increases the reactive source requirements on the transmission system as more distant reactive sources are used. Reactive power is a balance between the capacitance and the inductance of the system components as energy is alternatively stored in electric and magnetic fields. Thus, reactive power is a localized commodity, and the goal of any system is to reduce the size of the local community as much as possible. The goal is to enable real power flows without causing congestion and without increased losses. The selection of reactive power sources can cause congestion and thus can be used as a tool to increase the use of more expensive generation. Reactive power is an integrated market with the real power market as discussed in the following word. This work shows the dependency of real power on reactive power and discusses alternative implementations.