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2003-04 Seminars


Efficient pricing of a bundled product of both real and reactive power

Serhiy Kotsan
West Virginia University Department of Economics

Abstract

This paper examines price mechanism with one price assigned for each level of bundled real and reactive power. This pricing approach is simulated on the simple 3-bus system power auction where generators provide their bids on the bundle of real and reactive power. System operator (SO) is able to dispatch generators efficiently when the generators bid competitively. Incentives to exercise market power with respect to reactive power are tested on the auction. In addition, 30-bus network was tested, with the purpose of identifying generators willing to raise reactive power bids.