A model for reactive power pricing and dispatch of distributed generation

This paper proposes a new pricing mechanism and dispatch model for reactive power service from distributed generation (DG) resources, including wind turbines and solar photovoltaic plants, connected to a low voltage distribution system. Novel cost functions of reactive power service are proposed for DG resources as well as alternative VAR suppliers such as STATCOM and capacitor banks, taking into account their operational and fixed costs of reactive power provision. The real-time reactive power price is calculated based on the real power losses incurred for reactive power generation, while additional fixed payments are made to ensure capital cost recovery. An optimal power flow (OPF) model is developed which seeks to minimize the total payments of the Distribution Company (DisCo) for active and reactive power services while maintaining the system security. Two types of DG technologies are considered in this work: wind turbines equipped with doubly-fed induction generators (DFIG) and photovoltaic (PV) plants. The reactive power characteristics and different voltage strategies of these DG sources are also included in the OPF model. A test distribution system and a numerical example are used system to illustrate the application of the proposed method.