A Comprehensive Market-Based Scheme for VAR Management and Pricing in the Electricity Markets

The present paper is an extension of the authors proposal for the provision of the VAR service from dynamic VAR sources in a competitive market-based environment [6]. The formulation has been modified to include VAR utilization payment and possible power system transition states multiple base cases and contingencies with their associated occurrence probabilities. This treatment permits to accommodate real power system circumstances and consequently evaluate realistically expected total VAR capacity and utilization payment during the contracted period. The problem is stated as a minimization problem so that financial and technical issues mentioned above, emphasizing voltage security issue, are regarded explicitly in a unified single formulation. The objective function, which is the sum of expected VAR capacity payment, VAR utilization payment and operating costs during system operation, is assessed probabilistically under possible power system transition sates. The proposed method is suited for the existing UK VAR market, where it can be employed for the simulation and analysis of such kind of VAR market arrangements.