Reactive power procurement: A review of current trends

This paper reviews the international experience in the competitive procurement of reactive power and other 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, related compensation schemes and looks at more competitive ways for procuring reactive power. It appraises a novel approach (from the Power Potential initiative in the UK) for contracting reactive power services from distributed energy resources using a market-based mechanism. A 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) and the energy market. The introduction of more market-oriented mechanisms and resources (such as distributed energy resources) for acquiring reactive and active power services by the system operator gives rise to new opportunities and new ways to deal with voltage stability issues. Power Potential brings the opportunity to trial the technical and commercial solution, new roles and new interactions required in the introduction of a competitive reactive power market.