Reactive load modeling impacts on nodal prices in pool model electricity markets

This paper is concerned with the interpretation of the nodal prices in competitive electricity markets based on the Pool paradigm. Such prices are the byproducts of the optimization performed by the independent grid operator (IGO) to determine the centralized economic dispatch taking into account all transmission network and physical/operations constraints. The IGO implicitly takes into account congestion considerations in determining the centralized economic dispatch. Under the Pool paradigm, a system marginal price no longer exists and each bus may have a different real and reactive power nodal price due to line losses and congestion avoidance considerations that can arise when the limit of one or more constraints is reached. The objective is to explore the economic signals provided by these prices and effectively apply them in the design of markets and the rules of the road for these markets. The main focus of the paper is on the explicit evaluation of the impacts of the reactive load on the nodal real and reactive prices. We adopt a rather general model for reactive load model in which the reactive power at each node is represented as an affine function of the real power at that node, i.e., the reactive load is the sum of a constant and a constant power factor component. This model includes as special cases the constant reactive load and the constant power factor load including the case of purely real load corresponding to unity power factor. We investigate the relationship between the real and reactive nodal prices and evaluate the impacts on them of the dual variables due to the various other physical/operations constraints in the system. We discuss the significance of the nodal price observations and the effective utilization in developing appropriate price signals in the Pool paradigm.