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Reactive Power Procurement: Lessons from Three Leading Countries

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Abstract
This paper explores the international experience in the procurement of reactive power and related electricity ancillary services. It involves system operators from different jurisdictions including Australia, the United States and Great Britain. The paper evaluates the different procurement mechanisms and related compensation schemes. In addition, it also appraises a novel approach (from the Power Potential initiative in the UK) for contracting reactive power services from distributed energy resources (DERs) using a market-based mechanism. The conceptual auction design applicable to the procurement of reactive power is also discussed. Our findings suggest that competition in reactive power is very limited in comparison with other ancillary services such as frequency regulation and capacity reserves. The introduction of more market oriented mechanisms for acquiring reactive and active power services by the system operator opens new opportunities and new ways to deal with voltage stability issues. Power Potential trails a technical and commercial solution, new market roles and the new interactions required in the introduction of a competitive reactive power market.

Suggested Citation

  • Anaya, K. & Pollitt, M., 2018. "Reactive Power Procurement: Lessons from Three Leading Countries," Cambridge Working Papers in Economics 1854, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1854
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    1. Karim L. Anaya & Michael G. Pollitt, 2017. "Regulating the Electricity System Operator: Lessons for Great Britain from around the world," Working Papers EPRG 1718, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Hemmati, Reza & Hooshmand, Rahmat-Allah & Khodabakhshian, Amin, 2014. "Market based transmission expansion and reactive power planning with consideration of wind and load uncertainties," Renewable and Sustainable Energy Reviews, Elsevier, vol. 29(C), pages 1-10.
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    5. Seung Wan Kim & Michael G. Pollitt & Young Gyu Jin & Jip Kim & Yong Tae Yoon, 2017. "Contractual Framework for the Devolution of System Balancing Responsibility from the Transmission System Operator to Distribution System Operators," Working Papers EPRG 1715, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    6. Gandhi, Oktoviano & Rodríguez-Gallegos, Carlos D. & Zhang, Wenjie & Srinivasan, Dipti & Reindl, Thomas, 2018. "Economic and technical analysis of reactive power provision from distributed energy resources in microgrids," Applied Energy, Elsevier, vol. 210(C), pages 827-841.
    7. Pathak, A.K. & Sharma, M.P & Bundele, Mahesh, 2015. "A critical review of voltage and reactive power management of wind farms," Renewable and Sustainable Energy Reviews, Elsevier, vol. 51(C), pages 460-471.
    8. Gayatri, M.T.L. & Parimi, Alivelu.M. & Pavan Kumar, A.V., 2018. "A review of reactive power compensation techniques in microgrids," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P1), pages 1030-1036.
    9. Samet, Haidar, 2016. "Evaluation of digital metering methods used in protection and reactive power compensation of micro-grids," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 260-279.
    10. A Ahmadimanesh & M Kalantar, 2017. "Modification of the mandatory generation region of producers in the reactive power market by considering reactive power losses," Energy & Environment, , vol. 28(7), pages 744-762, November.
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    Cited by:

    1. Giulietti, Monica & Le Coq, Chloé & Willems, Bert & Anaya, Karim, 2019. "Smart Consumers in the Internet of Energy : Flexibility Markets & Services from Distributed Energy Resources," Other publications TiSEM 2edb43b5-bbd6-487d-abdf-7, Tilburg University, School of Economics and Management.
    2. Chyong, C. & Pollitt, M. & Cruise, R., 2019. "Can wholesale electricity prices support “subsidy-free” generation investment in Europe?," Cambridge Working Papers in Economics 1955, Faculty of Economics, University of Cambridge.
    3. Michael G. Pollitt & Lewis Dale, 2018. "Restructuring the Chinese Electricity Supply Sector – How industrial electricity prices are determined in a liberalized power market: lessons from Great Britain," Working Papers EPRG 1839, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    4. Jay, Devika & Swarup, K.S., 2021. "A comprehensive survey on reactive power ancillary service markets," Renewable and Sustainable Energy Reviews, Elsevier, vol. 144(C).
    5. Luigi Viola & Saeed Nordin & Daniel Dotta & Mohammad Reza Hesamzadeh & Ross Baldick & Damian Flynn, 2023. "Ancillary Services in Power System Transition Toward a 100% Non-Fossil Future: Market Design Challenges in the United States and Europe," Papers 2311.02090, arXiv.org.

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    More about this item

    Keywords

    reactive power; system operators; distributed energy resources; procurement methods; auction market design;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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