Pricing for Generators under Lost Opportunity Cost for Suppling of Reactive Power

Abstract

The importance of doing a thorough evaluation of the expenses associated with reactive power is paramount within the framework of energy markets that are becoming more competitive. The evaluation should include cost factors that enable the recovery of the Lost Opportunity Cost (LOC) component. This component emerges when a generator approaches its field limits and requires reactive power to accommodate increasing demand. At present, there is a prevailing belief that the pricing framework of 0.10₹/kvarh, as established by the Central Electricity Regulatory Commission, is insufficient in terms of adequately remunerating for services rendered outside the power factor range. This phenomenon is a consequence of the reduction in power factor, leading to an escalation in heat generation and consequently requiring a higher energy expenditure for its dissipation. The current cost structure fails to account for this factor. There is a clear association between the amount of effort spent in heat removal and the in-phase reactive current that is responsible for generating heat. To address this issue, a proposed pricing scheme has been put forth for reactive units generated by the generator, which considers various Power Factor scenarios and LOC.