A simulation based approach to pricing reactive power

We investigate the simulation of real and reactive power spot markets. While spot pricing of real power remains a viable option for the creation of a power system market, the future of a reactive power spot market remains cloudy. The large capital investment portion needed in pricing reactive power as well as the highly volatile nature of reactive power spot prices makes the creation of such a market difficult. In spite of this, a portion of the pricing scheme that is used for reactive power will likely be based on the spot pricing approach as this provides the most accurate signal for near real time system operation. The paper builds on a simple modification to the standard optimal power flow (OPF) in order to simulate the spot markers for real and reactive power. To achieve this, price dependent load models are introduced for both real and reactive power