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An evaluation of a local reactive power market: the case of Power Potential

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  • Anaya, K. L.
  • Pollitt, M. G.

Abstract

This paper quantifies the benefits of introducing reactive power markets that promote the participation of distributed energy resources (DER) in a coordinated way, between the electricity system operator and the electricity distribution utilities. The contribution that DER could make by displacing conventional network assets in supplying reactive power support is evaluated in the context of a case study, the Power Potential (PP) project in Great Britain. We discuss the rising need for absorptive (leading) reactive power in the PP trial area, driven by the rapid connection of renewable generation in an area of low demand growth. A social cost benefit analysis (SCBA) is performed to quantify the net benefits, with sensitivities regarding bid prices, % of DER participation, time horizons. Price information from the PP live trial conducted between January and March 2021 is also used to evaluate the robustness of the SCBA and to estimate benefits using actual prices. Our results suggest that energy consumers could save from 8-21% of business as usual asset costs by 2050. The introduction of trial bid prices increases these savings by around 3% of business as usual asset costs out to 2050. Potential sources of additional benefits on top of those identified in the SCBA are also discussed.

Suggested Citation

  • Anaya, K. L. & Pollitt, M. G., 2021. "An evaluation of a local reactive power market: the case of Power Potential," Cambridge Working Papers in Economics 2168, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2168
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    References listed on IDEAS

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    1. Anaya, Karim L. & Pollitt, Michael G., 2020. "Reactive power procurement: A review of current trends," Applied Energy, Elsevier, vol. 270(C).
    2. Gandhi, Oktoviano & Zhang, Wenjie & Rodríguez-Gallegos, Carlos D. & Verbois, Hadrien & Sun, Hongbin & Reindl, Thomas & Srinivasan, Dipti, 2020. "Local reactive power dispatch optimisation minimising global objectives," Applied Energy, Elsevier, vol. 262(C).
    3. Karim L. Anaya & Michael G. Pollitt, 2021. "How to Procure Flexibility Services within the Electricity Distribution System: Lessons from an International Review of Innovation Projects," Energies, MDPI, vol. 14(15), pages 1-26, July.
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    5. Zubo, Rana H.A. & Mokryani, Geev & Abd-Alhameed, Raed, 2018. "Optimal operation of distribution networks with high penetration of wind and solar power within a joint active and reactive distribution market environment," Applied Energy, Elsevier, vol. 220(C), pages 713-722.
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    7. Anaya, Karim L. & Pollitt, Michael G., 2015. "Options for allocating and releasing distribution system capacity: Deciding between interruptible connections and firm DG connections," Applied Energy, Elsevier, vol. 144(C), pages 96-105.
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    More about this item

    Keywords

    reactive power; social cost benefit analysis; distributed energy resources; ancillary services procurement;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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