Cost Evaluation for Capacitive Reactive Power
under the Deregulation Environment
*Young-Hyun Moon, *Jeong-Do Park, *Choon-Shik Jung
*Dept of Electrical Engineering, Yonsei University
Shinchon-Dong, Seoul 120-749 Korea
e-mail : moon(j?jlyonsei.ac.kr
Abstract: In this paper, the cost for capacitive reactive power is
evaluated considering the deregulation environment. For the cost
assessment of reactive power, the duration curve of reactive power
demand is introduced and investigated. Also, a guideline is
suggested to estimate the Q-cost by using the inverse of the Q-
demand duration curve. In order to obtain optimal real reactive
power allocation, a new algorithm is proposed by using the
piecewise linearization of the inverse of the Q-demand duration
curve and the LP (Linear Programming) technique. Under the
consideration of the network constraints, the new method solves the
optimal cost for capacitive reactive power to provide the system
incremental cost of real and reactive powers, which plays an
important role for spot pricing.
The proposed method is tested with sample systems using
MATLAB. The test results show that the algorithm yields
reasonable reactive power allocation and provides fair cost
evaluation for reactive power under the deregulation environment.
Keywords: capacitive reactive power, generation cost function,
linear programming, economic dispatch, deregulation,
power system
I. Introduction
Electric power systems are concerned with the supply of
real and reactive powers. In order to meet the real load
demands, the generating units need fiel, gas, hydro or
nuclear energy. Due to the huge amount of the required
energy, the cost of electric power has been considered in
various theories such as ELD (Economic Load Dispatch) and
UC (Unit Commitment). These theories are developed to
evaluate only the real power generation costs since the total
generation cost is mainly caused by the amount of the
required real power. Therefore, the economical generation
schedule and the economical generation dispatch have been
regarded as the most important part for the economical power
system operation [1].
In the practical point of view, additional expenses are
required in the power system operation such as utility
investment expenses, utility operation cost, depreciation cost
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**Hyun-Jong Kook
**Hyundai Heavy Industries co., Ltd.
Choongjung-Ro, Seoul 100-723 Korea
and so on. These expenses include the costs of the voltage
controlling utilities required for compensating reactive power
such as SC, ShR, LRC and etc. Notwithstanding these
additional expenses, there are no standards or theories for the
cost assessment of reactive power, especially under the
deregulation environment. Though, the additional expenses
should be paid to the electric companies.
Under the deregulation environment, an electric
company may or may not impose utility investment expenses
and utility operation cost on the customers. In order to
impose additional expenses on the customers, the following
problem arises. If the customers pay for electric charges
including utility investment expenses, a utility company may
adopt a simple strategy to impose utility operation cost on the
customers in proportion to the amount of reactive power
consumption. However, this policy does not meet the
principle of the competitive market place since it takes no
account of the facility investment costs.
This paper, deals with evaluation of capacitive reactive
power cost under the deregulation environment. For the cost
assessment of reactive power, the duration curve of reactive
power demand is introduced to take into account the
investment costs. The reactive power cost should have some
relationship with the Q-demand load curve. The Q-cost curve
can be arbitrarily determined by an individual Q-supply
company. Reactive power facilities, once installed, require no
operating costs other than the maintenance costs. This makes
it very difficult to provide some guidelines to estimate the Q-
cost. This paper suggests a guideline to estimate the Q-cost
by using the inverse of the Q-demand duration curve. The
normalized duration curve is interpreted as operating
probabilities of the reactive power facilities. The cost should
be increased in inverse proportion to the probability. With the
Q-cost curves provided by Q-suppliers, the system operator
should determine the optimal reactive power allocation,
which should be simultaneously performed with the real
power allocation.
This paper presents a new algorithm to obtain optimal
real reactive power allocation by using the piecewise
linearization of the inverse of the Q-demand duration curve
and the LP (Linear Programming) technique. Since the cost
for capacitive reactive power on every time stage can be
estimated by considering OPF (Optimal Power Flow), the
network constraints can be fully considered by the proposed
algorithm. Under the consideration of the network constraints,
the proposed method solves the optimal cost for capacitive
 reactive power based on the incremental cost analysis of real By means of the curve pattern of Fig. 1 (b), the cost
and reactive powers, which provides important information curve of real and capacitive reactive power can be expressed
for spot pricing. as Fig. 2.
The proposed method is tested with sample systems.
The test results show that the algorithm yields reasonable
reactive power allocation and provides fair evaluation of
reactive power cost. Therefore, it is expected that the
proposed method can be used as the basic guideline for
estimating the optimal cost for capacitive reactive power
under the deregulation environment.

II. Mathematical Model

The total cost for the system operation can be expressed 1

- PG,
as below: (a) Cost curve of real power

CT = ~ c,, (%,)+ ~ c,;(Qc; ) (1)

i= generalor iecopacilor
bank

where
c, : total operation cost of the entire system
: power generation at bus i
PGi
: capacitive reactive power at bus i C:)
Q.i

: fuel cost of unit i when generating

CD,(PC;)
power is equal to PGi (b) Cost curve of reactive power
: cost of capacitive reactive power when where,
Cqi (Qc; )
capacitive reactive power is equal to W(J) : the gradient of the j’ti segment of real
pl
Q.,
power cost curve for generator i
~(J) : the gradient of the j’ti segment of
ql
Considering the hourly reactive power demands during a capacitive reactive power cost curve for
day or week, one can easily find that the duration time bus i
rapidly drops with the amount of capacitive reactive power Cy) : the ordi-absissa of real power cost curve
increasing. The normalized duration time can be depicted in for generator i
Fig. 1 (a). The normalized duration curve can be interpreted Cy) : the ordi-absissa of capacitive reactive
as operating probabilities of the reactive power facilities. power cost curve for bus i
Consequently, the cost of capacitive reactive power should be Fig, 2 Cost curve of real and reactive power and its linearization
increased in inverse proportion to the probability. In this (In case of the number of linear segment is three)
study, the cost curve of reactive power is assumed to be
expressed by the inverse of the Q-demand duration curve as By using the piecewise linearization technique, the
given in Fig. 1 (b). relationships between power and its cost can be expressed as
follows:
Normalized C,,(Q,)
Duration Time (l)pw + ~w~:;) + 7?2$)P$
t t Cpi (pGi ) = C$)+ ‘pi Gi pi
(2)

Cqi (Qcj ) = C$) + m$)Q~) + m$)Q~) + m$)Q# (3)

PG,= P::) + P::) + P:) (4)

LJ!k_._L———— Q., = Q:)+ Qg) + Q:) (5)
Qct
(a) Q-demand duration ‘c’ (b) Cost curve of
curve rcactivcpower
Fig. 1 The relationship between the cost vs. (6)
capacitive reactive power

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 ‘(-i) < The power mismatches of each bus.
o s Qy < Qci
‘(j) : the upper limit of ~~)
d C;–c:-l<&
PC;
~:) where,
: the upper limit of Q)j)
c; : The total cost CT of k’th iteration
The upper and lower bounds should be considered for
all variables introduced for the linearization. Assuming the Step 9 If converged then terminate.
number of generator is n and the number of capacitor bank is Otherwise, repeat from Step 5.
m, the total operation cost is given by
The detailed algorithm is depicted in the following flowchart.

CT = ~cPi@(ii)+j~lcti(Qcj) (7) l---- ‘“d

i

By using the piecewise linearization for the cost I Construct Y-bus matrix I
functions, the optimal real and reactive power allocation
Perform
problem can be transformed into the following general LP
form. L the load flow
calculation
~

Pca=l

min(C~ ) = rnin(y oX) (8) r-cdcukdethkxiiu

subject to:
Ax=b (9)
xm<x<xM .+ f!?=
Calculate the real/reactive power

In the above formulation, the equality constraints are

given by the linearized equations of load flow equations. The
power flow restrictions for each transmission line can be
formulated in the form of (9) by introducing slacks variables.
L —No—
./> AP<&
AQ<&

w-’<’
III. Solution Strategy

This paper presents a systematic approach for the Fig. 3 The detailed flowchart of the proposed algorithm
purpose of evaluating the cost for capacitive reactive power The proposed algorithm yields the optimal allocation for real
and its allocation problem. The proposed solution method has and reactive powers with consideration of network
the following algorithm in the process of cost minimization, constraints, which can provide important information for spot
pricing of reactive powers in the competitive electricity
Step 1 Read the system data and construct Y-bus market.
matrix.
IV. Case Study
Step 2 Perform the load flow calculation.
The proposed algorithm has been tested with sample
Step 3 Set the initial condition with the load flow systems such as Pai 3-bus system, WSCC 3-machine 9-bus
results. sytem [4] and IEEE 14 bus system. The cost curve data of
Step 4 Calculate the initial cost. each system are given in Table 1 -3 and the load buses are
excluded in Table 1 -6. Both C$) and c:) are assumed
Step 5
Calculating LP yields A(3 , AV , & ,
to be zero for the calculation’s convenience,
Q:)
Table 1 Cost curve of 3-bus system
Step 6 Update $, V and calculate PGi, Qcj p:) ~(1) W(2) ~(:)
Bus P:) p;;) pl pl pf

Step 7 70 70 140 0,5 1.0 3.0

Calculate the real / reactive power of each bus
; 35 35 70 0.5 1.0 3.0
and the total cost CT
Step 8 Check the following convergence conditions.
Q:) Q:) Q:) ~;) @? %?
1 NA NA NA NA NA I NA

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 I 2 I 25 25 50 I 0.5 I 1.0 I 3.0 As shown in Table 4-6, the real and reactive power
allocations are changed properly with respect to the
Table 2 Cost curve of 9-bus system
economical total operation cost. This means that the
~(1) ~(2) ~(3)
Bus P:) P:;) p:) p! p} pl
deviation of the conventional load flow solution can be
1 25 25 40 0.5 1.0 3.0 modified with the proposed cost curve model and the
9 << 55 110 0.5 1.0 -4n suggested algorithm.
The detailed cost comparisons of each test system are
shown in Table 7.
Table 7 Cost comparisons and cost reductions of each system
1 10 10
2 NA NA ii NA NA ii
3 -4.0 -4.0 -8.0 -0.5 -1.0 -3.0
Table 3 Cost curve of 14-bus svstem
w=
As shown in Table 7, the proposed algorithm yields
rather economical results than the conventional case (initial
2 ii ii 14 0.5 1.0 3.0
3 0 0 0 0.5 1.0 3.0 cost) when the suggested cost curve model is applied. The
4 0 0 0 0.5 1.0 3.0 average total generation cost is reduced by 5.1 O/O. Even if the
5 0 0 0 0.5 1.0 3.0 practical parameters are not considered in detail, it is
absolutely not the negligible percentage in view of the total
Q:) Q:) Q:) ryz$) m$) m$) cost.
1 NA NA NA NA NA NA By using this technique, an electric company can cope
2 I
-lo I
-lo !
-20 1
-0.5 1
-1.0 1
-3.0 with the utility investment expenses problem concerning with
3 -2.5 -2.5 -5.0 -0.5 -1.0 -3.0 the capacitive reactive power under the competitive market
4 11 11 22 0.5 1,0 3.0 place. Therefore, it is expected that the proposed solution
5 I 50 I 50 I 100 I 0.5 1.0 3.0 method can be used as the basic guideline for estimating the
optimal cost for capacitive reactive power and for spot
The real and reactive power allocations of each test case
pricing under the deregulation environment.
are shown in Table 4-6. The initial costs are calculated by
It is also noted that the total iteration count can be
applying the conventional load flow results to the proposed
reduced by nearly about 20 ‘?40 if the proposed method
cost fimctions listed in Table 1 -3. The optimized allocations
performs the load flow calculation simultaneously during the
are calculated with the proposed algorithm.
optimization process.
Table 4 Real and reactive power allocation of 3-bus system (aIll In order to veri& the availability of the developed
method to the practical situations, another experiments are
performed. Considering the practical characteristics of the
generating unit, the initial values of real and reactive powers
are changed within 120 0/0 range of the rated output of the
generating unit. At this case, the proposed method produces
the total costs of each system same as the final cost of Table
7.

V. Conclusions
In this paper, the cost for capacitive reactive power is
evaluated considering the deregulation environment. For the
cost assessment of reactive power, the duration curve of
2 1.63 I NA 1.2882 NA reactive power demand is introduced and investigated. Also,
3 I 0.85 -0.108597 1.0 -0.1134 a guideline is suggested to estimate the Q-cost by using the
inverse of the Q-demand duration curve. In order to obtain
Table 6 Real and reactive Dower allocation of 14-bus svstem
optimal real reactive power allocation, a new algorithm is
proposed by using the piecewise linearization of the inverse
of the Q-demand duration curve and the LP (Linear
Programming) technique. Under the consideration of the
network constraints, the new method solves the optimal cost
for capacitive reactive power to provide the system
3 0.0 -0.071973 0.0 -0.0720 incremental cost of real and reactive powers, which plays an
4 0,0 0.319081 0.0 0.3193 important role for spot pricing.
5 0.0 1.421250 0.0 1.4310 The proposed method is tested with sample systems

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 using MATLAB. The test results show that the algorithm Choon Shik Jung was born in Korea, 1969. He received the
yields reasonable reactive power allocation and provides fair B.S. degrees in Electrical Engineering from Pusan University
cost evaluation for reactive power. Therefore, it is expected Pusan, Korea, in 1996. He is currently pursuing a M.S.
that the proposed method can be used as the basic guideline degree in Electrical Engineering at Yonsei University and is
for estimating the optimal cost for capacitive reactive power also working for KEPCO, His research interests are in the
under the deregulation environment. Finally, it is noted that area of the distribution system and economic dispatch in
the proposed method can be extended for the applications to electric power systems.
the area of unit commitment.
Hyun Jong Kook was born in Korea, 1964. He received the
VI. References B.S. and M.S. degrees in Electrical Engineering from Yonsei
University Seoul, Korea, in 1987, 1989 respectively. He is
[1] Young-Hyun Moon, et al, “A New Economic Dispatch currently pursuing a Ph.D. degree in Electrical Engineering at
Algorithm for Thermal Unit Generation Scheduling in Power Yonsei University and is also working for Hyundai Heavy
System”, Paper # 2000 WM-389 PWRS, Presented at the Industries co., Ltd. His research interests are in the area of
IEEE/PES Winter Meeting, Singapore, Jan. 2000. generation scheduling and economic dispatch in electric
[2] C. Wang, S. M. Shahidehpour, “Effects of Ramp-Rate Limits power systems.
On Unit Commitment And Economic Dispatch”, IEEE Trans.
on Power Systems, Vol. 8, No. 3, pp. 1341-1350, Aug. 1993.
[3] Allen J. Wood, Bruce F. Wollenberg, “Power Generation,
Operation, and Controt”, 2ndEdition, Wiley, 1996.
[4] Peter W. Sauer, M. A. Pai, “Power System Dynamics and
Stability”, pp. 171, Prentice-Hall, 1998.
[5] Katia C. Alimeid~ “Critical cases in the Optimal Power
F1ow’’,IIEEE Trans. on Power Systems, Vol. 11, No 3, pp.
1509-1518, Aug. 1996.
[6] N.H.Dandachi,, M.J.Rqwlins, “OPF for Reactive Pricing Studies
on the NGC system”, IEEE Trans. on Power Systems, Vol. 11,
No. 1, pp. 226-232, Feb. 1996.
[7] C.N.Kurcz, D.Brandt, S.Sim, “A Linear Programming Model for
Reducing System PeakThrough Customer Load Control
Programs”, IEEE Trans. on Power Systems, Vol. 11, No. 4, pp.
1817-1824, NOV. 1996.
[8] M.Yoshikawa, ” On-line Economic Load DisPatch Based on fuel
cost dynamics”, IEEE Trans. on Power Systems, Vol. 12, No. 1,
pp. 315-320, Feb. 1997.
[9] Jason Yuryevich, “Evolutionary Programming Based Optimal
Power F1OWAlgorithm”, IEEE Trans. on Power Systems, Vol.
14, No. 4, pp. 2145-1250, NOV. 1999.

Biographies

Young Hyun Moon was born in Korea, on March 11, 1952.

He received B.S. and M.S. degrees in Electrical Engineering
from Seoul National University, and the M.S. and Ph.D.
degrees from Oregon State University in 1975, 1978, 1980,
and 1983, respectively. In 1983, he joined the faculty of
Yonsei University, Seoul, Korea, and is now a professor of
Electrical Engineering. He visited Univ. of Illinois for the
1992-1993 academic year. Dr. Moon is a member of the IEEE
Power Engineering Society. His specialization is state
estimation, system control, and stability analysis in electric
power systems.

Jeong Do Park was born in Korea, on October 6, 1969. He

received the B. S., M.S. and Ph. D. degrees in Electrical
Engineering from Yonsei University Seoul, Korea, in 1992,
1994, 2000 respectively. His research interests are in the area
of generation scheduling and economic dispatch in electric
power systems.

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