A Reactive Power Market for the Future Grid

Abstract

As pressures to decarbonize the electricity grid increase, the grid edge is witnessing a rapid adoption of distributed and renewable generation. As a result, traditional methods for reactive power management and compensation may become ineffective. Current state of art for reactive power compensation, which rely primarily on capacity payments, exclude distributed generation (DG). We propose an alternative: a reactive power market at the distribution level. The proposed market uses variable payments to compensate DGs equipped with smart inverters, at an increased spatial and temporal granularity, through a distribution-level Locational Marginal Price (d-LMP). We validate our proposed market with a case study of the New England grid on a modified IEEE-123 bus, while varying DG penetration from 5% to 160%. Results show that our market can accommodate such a large penetration, with stable reactive power revenue streams. The market can leverage the considerable flexibility afforded by inverter-based resources to meet over 40% of reactive power load when operating in a power factor range of 0.6 to 0.95. DGs participating in the market can earn up to 11% of their total revenue from reactive power payments. Finally, the corresponding daily d-LMPs determined from the proposed market were observed to exhibit limited volatility.Keywordsreactive power, power distribution economics, power quality, distribution level market, optimal power flow I. INTRODUCTION W ITH a growing demand for zero-carbon generation in the electricity sector comes an increase in grid-edge distributed energy resources (DERs), and in particular, distributed generation (DGs). The increasing penetration of these small-scale resources disrupts the existing industry practice for power dispatch, device control, and market compensation mechanisms. Traditionally, large controllable generators at the transmission level have been responsible for maintaining grid stability and power quality; however new strategies are required for the emerging grid. While recent efforts such as the FERC Order 2222 [1] indicate a move towards accommodation of DERs, new electricity market structures are needed in order to fully embrace their high penetration and lead to a feasible framework for their integration even while preserving grid stability and power quality. This paper proposes one such market structure, with a focus on a reactive power market at the distribution level.Reactive power is intimately connected with power quality, and its regulation is achieved in the transmission grid by altering the power factors (PFs) of large synchronous generators. The outputs of these generators are easily controllable thus