Reactive power pricing in a deregulated electricity industry

Liberalization and deregulation of electricity industry is being implemented in different countries all over the world. This paper explores the economic and technical issues of reactive power that must be considered for determining reactive power pricing in an open access environment. This paper also discusses the static and dynamic characteristics of reactive power demand and its importance in determining reactive power pricing. The present study reviews the existing reactive power tariffs. A reactive power pricing proposal is presented based on marginal cost price and the reactive energy consumption with the provision of incentives that encourages both the system operator and the customers