Unbundled Reactive Support Service: Key Characteristics and Dominant Cost Component

In this paper, we present a systematic exposition of generator-provided reactive support as an unbundled ancillary service under open access transmission. We discuss the nature and salient physical characteristics of reactive support and analyze their implications in acquiring VAr support as one of the ancillary services. The paper provides an analysis of the dominant component in the cost structure of this service. This component is determined from the opportunity costs, which are evaluated from the foregone profits of a generator in making sales in real power markets by providing reactive support instead of real power. We illustrate the combined effects of the voltage set points of the generators and of the generator capability constraints on the transactions in competitive electricity markets, both under normal and contingency operating conditions. We discuss the key role of the grid operator in the provision of the reactive support, and the key considerations in the acquisition and pricing of the reactive support service.