Reactive Power Pricing Simultaneous Using Spot and Bilateral Market Models Considering Opportunity Cost

Document Type: Research Paper


1 Ministry of Energy, IRAN Power Generation Transmission and Distribution Management Company (TAVANIR) Tehran, Iran

2 of Electrical Engineering, Saveh Branch, Islamic Azad University, Saveh, Iran

3 Ministry of Energy, Iran Grid Management Company, Tehran, Iran

4 Ministry of Energy, Thermal Power Plants Holding Company (TPPH), Tehran, Iran


Reactive power as a utility of ancillary service in restructured environment is supplied by Independent System Operator (ISO). Due to the particular importance of optimal pricing strategy in the power market, the study aims to investigate this problem more closely. To this end, first the problems of restructuring, reactive power generation and its associated costs thereof were reviewed and different types of transmission rights identified. Next, an algorithm was proposed as the selected method for reactive power pricing in terms of Fina g simultaneous Opportunity Cost (OC) at power plants. The pricing method was based on the respective marginal costs as ncial Transmission Rights (FTR) of transmission lines in the presence of the hybrid market model (spot and bilateral) usin well as the optimal power flow and implemented the succession planning method via MATLAB for IEEE 57-buses test system. Comparison of the results obtained from the proposed method (where in capacitors and Static VAR Compensator (SVC) were considered as reactive power generation sources) with those of the current pricing method used in the Iran power grid showed increased earnings due to reactive power investment.