IEEE MELECON 2004, May 12-15, 2004, Dubrovnik, Croatia Reactive Power Evaluation and Market Power in Liberalized Ancillary Services Market 1. Kuzle", M. Klar and S. Tesnjak” * Faculty of Electrical Engineering and Computing/Power System Department, Zagreb, Croatia ceamail: igor kuelo@ferhr; mato klaie@e hy; sejid.tesnjak(@fer br Abstract—As result of eletrie power system liberalization, very ancillary serve is worth economically. Clear and {transparent rules should be determined forth evaluation of cach service. Vollage contra is very important ancillary fervces and therefore open market of reactive. power Decomes reality In deregulated power markets. AI that has consequence in need for economic evaluation of reactive power. Al, because of location-based nature of restive Power and’ geographically very limited market, arises ‘hance for so-called “market power”. In this paper, one method of reactive power evaluation is presented wi ‘emphasis on market power measuring Index Terms = liberalization, competitive market, reactive ‘over, voltage senstviy, market power 1. Iytropucrion Voltage contol and reactive power supply is an ancillary Service tht support reliability of eleciic power systems and improves stability. The biggest pr of reactive power consumption goes to induction motors and ‘elements of transmission system ((ansformers, ines). To maximize the amount of active power that can be transfered across @ congested transmission interface and because of losses reduction, flows of reactive power must bbe minimized. Also, production of reetive power usually Timits generators real power capability ‘The significant differences between the active and ‘Active power can be delivered over much greater distances beeause of thatthe supplying resources fate not location constrained like reactive power sources which must be distributed throughout the system, ‘+ In modern electric power systems generation of sctive power requires other energy resources (hydro, nuclear, solar... while reactive power requires almort'no “fuel” to produce (except in ease of synchronous compensstor) ‘Much of problems associated with voltage control and reactive power evaluation come from combining these various aspects into a single ancillary service. Suppliers of this service, in these cases generators with reactive power capabilies, are not able to independently determine eleciric power system voltage control request. System Operator must employ resources to meet requirements and te transmit appropriate price signals to customers. Since itis not economically 1o wansmit reactive power at longer distances, it i usually necessary to produce ‘eactive power close tothe place of its consumption, (0-7803-8271-4/04820.00 ©2004 IEEE Therefore, liberalized market of reactive power is ‘geographically very limited and chance for market power fries due to the limited number of potential suppliers. Generators near 10 the bus with great reactive. power ‘consumption afe in much better position 10 provide necessary voltage contol service than one that is Toeated far from this bus. Also, in many liberalized electric power systems in world, prie of voltage control ancillary service 'S location dependent. Most of the independent system operators offer reactive power prices with included Voltage seeurity component [4) ‘which makes closer generators more competitive inthe reactive power market than the others. To indicate the appearance of market power it is necessary to evaluate how much reactive power worth economically Inthe last few years in Mberalized markets in the world there has been rapid evolution toward a market approach {o the provision of reactive power. Thus a need to identify the costs incurred for providing voltage suppor arises, ‘Generators produce most of the reactive power in the electric power system. Theits costs consist of eapital costs, ‘operating costs and opportunity cost. = capital costs, costs of investment, facilites, buildings, = operating costs, costs of fuel, maintenance = opportunity costs, appear as a result of reduced real power generation during increased neod of reactive power [6 Because of that, voltage control in modem power systems is a complex and expensive task due to the fact ‘hat continuously. increasing number of electric power systems operates close to their technical limits Figure | qualitatively shows how cost of reactive power production rise regarding amounts of generated reactive power. Itcan be seen that generation costs rise rapidly as ‘production nears is margins of Mars lagging ot leading. ‘This happens duc to the previously descrived opportunity costs. Further problem appears if generators reach their ‘esetive poser marginal capacity, Voltage control ability at subject place then drops and reactive power price rises. Opportunity costs can highly increase tolal costs of voltage control as an ancillary service during high load conditions as shown in Figute 2 1075roasive poner edict cote Figure Gznertoreacive power rdction cots ‘ausatney) VOLTAGE CONTROL SERVICE PRICE (Hiteamy Figwe2, Voge onl vice rice (qitainely) At critical point of load T, costs for this ancillary service inetease rapidly. Therefore it is very hard 10 realize if one or more producers is exercising market power. In some eases market must be observed for a long period of time before market power exercising can be registered Method for reactive power evaluation should have fotfowing features: ~ it should be simple to compute, = it should take location-based nature of reactive power into account, it should adapt to changing operating conditions. Based on these objectives, many methods are proposed in various references. Some of them are based on vollage sensitivity calculating as follows: = solving a base power flow case, = calculating the Jacobian a the operating point, = for every location of interest, determining the sensitivity of the voltage at that location with espect 10 the reactive power injection at every ‘generator in turn, = caleulating load sensitivity at given location with respect 10 the reactive power injection at every ‘generator in operation. Following these objectives value of reactive power, from each producer on the competitive market, can be described. Given values also describe the share of each producer in ceruin bus of market. Thus, cerain indexes for measuring of market power in the given part of competitive market can be calculated, These indexes are {or example Herfindahl-Hirschmann Index (10), entropy coefficient (E, 4-fim and 8-firm concentration rai Calculation of these parameters based on voltage sensitivity caleuatons is described a follows, Tl Voutacesensmiviy Voltage sensitivity (VS) is a value that describes marginal eative poster injection or absorption needed for ‘ollage cone: Mathematically iis deserted a 29 204, 4 fe, 0 Values for FS ean be ten fom Iacobiansubmatx of the elect power system atthe given operaling point. For dzceribing the influence that each generator isn The fiver Toad, vllage sensitivity of load Z with respect 10 {eacive power Injection of every generator Gin operation ispivenas vs Wg We yt as, av “ou ‘This coefficient gives a value of reactive povwer that generator G needs to produce to keep the voltage on the bus with Toad S; constant during vansation of consumption. Further, ican be writen a 2 mh je BL 2 6, + 30,)= Q) Se ag e121) sO Considering that dependences of oud ative power with respect to volog is negligible comparing to the same Fnctonaliy of cactve power () eam be fer wen @ you = 220. 244 “ au ou A needed values are given in Jacobian submatrit. Suiject coccien gives the shat (2) of he producer in artular ancillary services market only i he eae when {he some, gencrfor ba lrge enough reactive power pciy it pacice, marketshare proportional fo the fale of maximum generator reactive power capaciy and reactive power loud the given bs. 5; + max [2max} (nial)! Oe 6) Since reactive power load , depends upon demand ime depend nts paper simple case is resented find given ratio te not considered (tis assumed esa 1) ‘caning tat value 9~YS staken into account. That the situation when all producers have enough capacity to cover given demand shire With determined shares of ich producer inthe competitive marke, diferent coefficients for measuing tmakat pert piven bs canbe calculated ss follows 1076A. Herfindabl-Hirschman Index (HH) HHL 's one of the most common means for measuting market power. This index is defined as follows: HHI = E3P ©) = where sis marketshare of each generator. ‘Summation i made over all V paticipants in a given market (bus), ‘Maximum value of HH/ is 1 if all the parameters are expressed in per unit In that ease entice market isin he share of one Company which has pute monopoly. There are no clear marginal values 10 determine whether the ‘market is highly concentrated or not. However, US Department of Justice for example issues and revises ‘guidelines for mergers [8]. These guidelines rely on use of HHI to determine appropriate conditions that indicate ‘market power concentration, According to these {Euideline, spectrum of market concentration measured by ‘HHI can be divided into thre repions that can be broadly characterized as = uneoncentated (HHH below 0.1), moderately concentrated (HHI between 0.1 and 0.18) and = highly concentrated (HHI above 0.18) B. Entropy coefcient (6) Coefficient Eis another coefficient for measuring market power defined as follows B= Elog, (Us) o Iis value is, 2210 in the pure monopoly and rises nonlinearly as the numberof partcipans increases, Bach market concentration index has ils own suvancages and disadvantages. I is impossible establish ‘clear Value below or above which market power exists for any index. There are only some recommendations for their evaluation, However, these coefficients can serve as an indicator of potential market power in given location. TI, NUMERICAL EXAMPLE Real part of south Croatian electric power system with its Hydro Power Plants (HPPs) and 400 kV” substation Konjsko is taken as an example for evaluation of reactive ower produced. by. diferent generators. Considered electric power system i shown in Figure 3 Disadvantages of this model comparing to real ‘operating conditions are that some blocks in power plants are not shown namely (one block in HPPs Djale and Grlovac and two blocks in HPPs Zakucac and Orlovac) Base power used here is 100 MVA Software used for simulation is PowerWorld 9.0, Freeware, ‘Therefore it was necessary to mike some restictions in bus numbers. Also, HPP Kraljevac is rely ‘operating since itis an old power plant placed at old Cetina riverbed downstream damn and. water intake for other power plants and operates using only the biological minimum water released fom upstteam dam” and- the ‘overtopping. However, it can serve well for vollige ontel purposes and therfore i i interesting wo cout go oF Finwe3, Pa fou Crstn lo per tam Loads ate estimated according to real operating states. They are represented on the high voltage side of power plans since itis a place where the trade between the producer and Independent System Operator will be done. {Loads are shown in Table Resuls for s, are shown in Table I Results show that ‘otal market share is not equal 1 in ay’ e886. The rest of necessary reactive power needed at each bus is supplied from substation Konjsko which is considered as an infinite bus. Iti also shown that none of the participants has share big enough, to inluence onthe reactive power price. Increased market concentration though is possible at buses 7 and 9 Figure 4. graphically shows distribution of coefficient values on considered leetreal network buses. AS i's cleatly seen different method for coefficient evaluation ‘may not give similar results. TABLEL —_Loappara@aw ano Mvass) Cre ts Ts Ta Tet Pps soso P92 fas (Coto fo To To Ts TABLE AnaLyssnesuts blots [oye ta Ge] 0 [oes | 00 [00 [ 00 | 00 om ON cr | 00 [00 | ons [oss [oss | oo iw |-eo | 00 | vow [eas [oar | oo cx [eur [ oo | oo | 00 | oo [oasi 1077