Early in February, FERC issued a staff report on a subject that is critical to grid reliability but has not received as much attention as one might expect. The topic is reactive power, or more specifically, how to ensure the transmission system has enough reactive power to maintain the voltage levels necessary for reliable operation of the power delivery system. In its conclusion, the report offers four broad recommendations:
1. Reactive power reliability needs should be assessed locally, based on clear national standards.
2. These needs should be procured in an efficient and reliable manner.
3. Those who benefit from the reactive power should be charged for it.
4. All providers of reactive power should be paid, and on a nondiscriminatory basis.
Seems reasonable enough. If you had skipped the 100 pages of the report that come before the recommendations, you might not think this reactive power issue was much of a problem, but of course nothing is as easy as it appears in bullet points.
Reactive power is indeed a major concern. It is integral to system reliability, and yet there are no national standards to establish how it should be measured or even what a suitable reserve margin might be. The world of Volt-Ampere-Reactives (VAR) is murky, and the FERC report goes a long way toward clarifying many technical and market-related concerns, but the central issue-the efficiency and even feasibility of a competitive market for reactive power-is still very much up for debate.
Reactive power is even more difficult to pin down than its counterpart, real power. Engineers say it “doesn’t travel well” because of the significant line losses it incurs at higher loading, which makes it a highly localized commodity. VARs must be produced close to where they are consumed. At the same time, equipment on the power system and at customer sites can both produce and consume reactive power, depending on system conditions at a given moment.
VAR support also comes in two varieties-static, which is itself dependent upon voltage and cannot be precisely controlled, and dynamic, which can be adjusted in near real-time. Capacitors provide static VARs, and are typically installed by utilities or large industrial customers whose operations demand a certain amount of reactive power (e.g., those with large motor loads). Generators and certain flexible AC transmission system (FACTS) devices provide dynamic VARs, though at much greater cost than capacitors.
With the myriad combinations of who provides reactive power, what type of equipment they use and in what location, it’s perhaps not surprising that there is so much variation in terms of how reactive power is procured from one region to the next. Most RTO/ISOs have provisions in their tariffs for generators to be compensated for providing reactive power at the request of the system operator. Each region, however, uses its own formula to arrive at a price for reactive power.
The California ISO is unique in that compensation under its rules is limited to lost opportunity cost for instances where a generator must reduce its real power output in order to comply with ISO directives. The other regions use a combination of capacity payments and lost opportunity payments. In many instances, though, independent power producers do not receive compensation for providing reactive power service while their transmission-affiliated competitors do.
FERC’s report calls for an end to this practice, which the agency sees as discriminatory. This is a good idea, but it begs the question of who pays for reactive power and what the price should be. In response to the latter question, FERC clearly favors a competitive market akin to the forward auctions for real power and other ancillary services currently in place in restructured markets like PJM, NYISO and others. In response to the first question, however, FERC provides only a general guide, indicating that the cost of reactive power should be borne by those who benefit from it.
The decidedly non-specific nature of this statement indicates how ill-defined reactive power really is as a product. In truth, we all benefit greatly from reactive power. As the single most important factor in preventing voltage collapse, reactive power is essential to keep the grid up and running. However, some customers require a substantial amount of reactive power for their operations. Should these customers bear the cost of that requirement, and if so, at what level of demand?
On the other side of the equation, the question of quantifying the cost of reactive power remains largely unanswered. For generators, the costs associated with producing VARs are mostly fixed or sunk costs, so for them the challenge is to allocate those costs for VARs. On the transmission side, investments in reactive power are easier to quantify but in either case the question remains: who pays?
Ideally, a competitive market for reactive power would be integrated and co-optimized with the markets for real power and ancillary services. But even assuming we can agree on a method to allocate the cost, the infrastructure to make such a market a reality is still years away. As FERC’s report notes, much work needs to be done in order to create a more precise model of reactive power markets, and even then there would still be a lot of code left to write before we arrived at a live, functioning market.
Given the industry’s present focus on reliability, it might be useful to consider the debate over reactive power as part of the larger discussion of reliability standards. If, for example, NERC were to be vested with the authority for establishing and enforcing those standards as the “Energy Reliability Organization” envisioned by FERC, then it could easily bring some continuity to the patchwork of rules we have now regarding reactive power compensation. Whether or not we end up with a competitive market, the reliability of the grid today would certainly benefit from the clarification national standards would bring.
There are many questions we will need to address with regard to reactive power. Should dynamic (or mobile) VAR support receive a premium? Should non-synchronous generation sources like wind be held to the same reactive power standards as other sources? These and many other questions appear at the end of FERC’s report, almost like a homework assignment for the industry. Answering them will provide a solid foundation from which to address the larger issue of whether or not reactive power should be procured in competitive markets, but it would be wise to mind one observation in the report’s introduction: “Efficient competition is difficult to achieve, but competition merely for the sake of competition is just sport.”
Fesmire is a communications manager in ABB’s power technologies division, and writes regularly on transmission and distribution, IT systems and other industry topics. The opinions expressed here are his own and do not necessarily represent those of ABB. Bob can be reached via email at firstname.lastname@example.org.
EL&P welcomes him as our newest contributing editor. Look for articles by Bob in each upcoming issue this year.