On the procurement and pricing of reactive power service in the electricity market environment

Many kinds of ancillary services must be provided in the new electricity market environment, and reactive power service is among the most critical ones. First, the management and procurement of reactive power service are outlined, followed by a brief analysis of associated procurement mechanisms and a summary about current practices in several operating electricity markets. Then, the theoretical basis and characteristics of spot pricing are clarified, and two methods based on spot pricing and power flow tracing respectively analyzed. Finally, some problems not well solved in reactive power pricing are clarified and future research areas prospected.