The Impact of Reactive Power on the Electricity Market Equilibrium

This paper investigates the impact of reactive power on the electricity market equilibrium. The analysis is performed using an interior point algorithm based on the AC network model for determining the Nash supply function equilibrium (SFE) of bid-based electricity markets. The effect of reactive power is examined using two different voltage regulation control modes at the generation buses. The generator bus voltages, in the first mode, can be optimized within the limits 0.95-1.05 p.u., whereas in the second mode they are controlled to a given value of 1.0 p.u. Further tests were performed using the second control mode but setting the load power factor to different values between 0.7-1.0 for different reactive power demand. The numerical results confirm that the reactive power has a significant impact on the electricity market equilibrium affecting nodal prices, social welfare and individual profits of the generating firms