Reactive Power Delivery Incentives

Reactive Power Delivery

Incentives

Harvard Electricity Policy Group 12/2/04

Alan Robb VP Operations GridAmerica LLC

Agenda

•What is Reactive Power?

–Why do we need it?

–How is it provided?

–Who can provide it?

–How do we balance voltage?

•The UK Reactive supply

•New England & New York Reactive

payment arrangements

To the engineer……..

Sinusoidal voltage:

ω

Constant angular velocity:

Sinusoidal voltage:

V1= V1sin (ωt+ φ1)

Imaginary Part

V1

V2

φ2

φ1

V2= V2sin (ωt+ φ2)

1

φ

ω

Time-Domain

representation

Real Part

To the engineer…...

Overexcited

Generator

jIaXd

Ei

δ

θ

Ia

VaIaR

• Synchronous Generator

GVa

Ia

Zd

Ei

Underexcited Generator

jIaXd

Ia

IaR

Va

Ei

θδ

To the rest of us…….an analogy helps

You can’t move the wheelbarrow

(active power delivery)

unless you lift the arms!

(reactive power)

Why do we need it?

•maintain system reliability

–support local system voltage

–maintain voltage step changes within

specified limits, steady state post fault

•support the transmission of active

power

•the requirements vary with location

and load

How is it provided?

Generation Demand

Lagging Mvar Mvar

MWMW

Mvar Mvar

Lightly loaded lines/Cables

83%

Heavily loaded lines

Inductive

Motors, fridges

etc

5%

12%

Capacitive

Fluorescent lighting

Leading

MW

MW MW

MW

Who can provide it?

Controllable

Sources/Sinks

•Generators

•Synchronous

compensators

•Capacitive and

inductive

compensators

Less Controllable

Sources/Sinks

•Overhead Lines

•Underground cables

•Transformers

•Customer demand

How we balance voltage

PQ

Load

PQ

Load Mvar

Mvar

Transmission

Distribution

How we balance voltage

PQ

Load

PQ

Load Mvar

Mvar

Transmission

Distribution

How we balance voltage

Post fault Voltage levels

Maintained by automatic change

In generator reactive output

Mvar

PQ

Load

PQ

Load

Transmission

Distribution

Lost capacitive effects from faulted circuit

Increased inductive effects from more heavily

loaded remaining two circuits

UK Reactive Supply

1997 onwards

•Obligatory Reactive Power Service (aka the

“Default Service”)

•Enhanced Reactive Power Service

•Both services, especially, enhanced market

services, interact with transmission

investment and expansion

•Under purview of Regulator

•Funded by daily payment from suppliers

Obligatory Reactive Power Service

●Rule based payments (enforced via Grid Code

obligation)

●Default obligation on all large generators

(typically >50MW)

●Minimum reactive power range

●Fixed MVArh payment rate (reviewed annually)

¾Transition to utilization only payment (step down from

80%

capability to 0% capability over 4 years)

¾Payment is currently approximately $2.40/MVArh

●No need to tender

Enhanced Reactive Power Services

●Can be same technical service as the “Obligatory

RPS”

●Offered via market tender

●More potential providers (eg. smaller generators)

●Minimum 15MVAr (lead or lag)

●Generator offers price curves

●Contracts 12 months minimum

●Generator chooses prices and other terms to tender

●Can offer additional services

●If tender not accepted, still gets Obligatory RPS

(ie.default rate)

Reactive Supply

Reactive Supply –

–

Enhanced Reactive Power Service

Utilization (£ per MvArh)

£/ Mvarh

CU1

CU2

CU3

Q2Q3

Q1

Mvar Output

£

Capability Payments

Lead

Mvar

Lag

Mvar

Synchronized capability price

Available capability price

Assessing Tenders

Tenderer

Tenderer offers

offers

“enhanced service”

Default

Market

Payment

Forecast

Default

Payment

Forecast

Historic Performance

Capability Incentive

Investment /

Constraints

Location &

Effectiveness

Forecasts

Mvarh

Hours Available /

Synchronized

Interactions

Sensitivities /

Scenarios

Units participating (April tender round)

0

20

40

60

80

100

120

140

160

1998 1999 2000 2001 2002

eligible units

tenders received

sucessful with

supply agreement

Features of “Market” Contracts Interacting with

System Operation and Investments

•Generator can use Mvarh price to incentivize

National Grid (as System Operator) to despatch unit

to low Mvar outputs

•Generator creates own financial incentive to maintain

Mvar capability; this may reduce transmission

investment needed

•Generator can offer capability in excess of regulatory

requirement: can reduce transmission investment

needed

New England

Reactive Compensation

Reactive Compensation-

-introduced 2001

introduced 2001

•Capacity payment made to Qualified Generators

•Payment based on lagging reactive capability

demonstrated at real power capability

•$1.05/kVAR-year *capability – reduced if active

capacity reserve margin more than 20%

•Lost Opportunity Payments – active power

–Pull back to provide more reactive

–Synchronous compensation

–Active power produced for VAR only requirements

New England

Other Reactive Sources

•Capacitors

–Capital costs collected by transmission

owners through transmission rates

•Synchronous condensers and FACTS

devices

–Capital costs collected by transmission

owners through transmission rates

–Real power consumed treated as losses on

the NEPOOL transmission system

–Treatment will be revisited on an as needed

basis.

•Currently considering compensation for

merchant HVDC converter reactive output

New York

Reactive Compensation

•Capacity payments made to all generators under

contract to supply Installed Capacity

–Other units and synchronous condensers eligible

although receive pro-rata payment based on the

number of hours run

•A resource must demonstrate that it has successfully

performed reactive power capability testing

•Payments require the ability to produce/absorb

reactive power within the resource’s tested reactive

capability, and to maintain a specific voltage level

under steady-state and contingency conditions

•Payments withheld if unit fails to respond when called

upon or following a contingency as determined by

NYISO

New York Reactive Compensation

Components

•Capacity Payment

–Annual payment, 1/12 paid monthly

–Paid to all qualified resources

–Equal to $3.919/kVAR-yr for qualified VARs

•Lost Opportunity Payment

–Paid to units dispatched down to provide

reactive supply

–Equal to the MW reduction times LMP minus

the generators energy bid (lost infra-marginal

revenue)

New York

Other Reactive Sources

•Capacitors, synchronous condensers

and FACTS devices

–Capital costs collected by transmission

owners through transmission rates

•TCCs (FTRs) awarded if installation

increases transfer capability

Summary

•RP not commodity – very locational

•Simple RP payments appear to deliver

system needs without impeding active

markets

–Benefits of complex arrangements?

•Some limited evidence of Reactive

payments interacting with

Transmission investment in UK

Reactive Power Delivery Incentives

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