# A Reactive Power Market for the Future Grid

**Authors:** Adam Potter, Rabab Haider, Giulio Ferro, Michela Robba, Anuradha M. Annaswamy  
**arXiv:** [2110.02337](https://arxiv.org/abs/2110.02337)  
**Date:** 2021-10-05  
**Summary page:** https://www.summarizepaper.com/en/paper/2110.02337v3/

## Key points

- Increasing adoption of distributed and renewable generation at the grid edge due to decarbonization pressures
- Concerns about traditional methods for reactive power management not meeting needs of decentralized grids
- Proposal for a reactive power market at the distribution level to compensate distributed generation units equipped with smart inverters
- Use of distribution-level Locational Marginal Price (d-LMP) mechanism for increased spatial and temporal granularity in compensating DGs
- Case study on US New England grid showing successful accommodation of high levels of DG penetration with stable revenue streams for reactive power services
- Inverter-based resources meeting over 40% of reactive power load within a power factor range of 0.6 to 1.0
- DGs earning up to 11% of total revenue from reactive power payments in the proposed market
- Limited volatility in daily d-LMPs indicating consistent pricing signals for participants
- Potential role of inverter-based resources in supporting grid operations and network-level objectives while adhering to constraints
- Contribution towards reimagining reactive power compensation in decentralized and decarbonized grids through a novel distribution-level market mechanism, enhancing grid resilience and efficiency

## Summary

In response to the increasing pressures to decarbonize the electricity grid, there has been a notable surge in the adoption of distributed and renewable generation at the grid edge. This shift has raised concerns about the effectiveness of traditional methods for reactive power management and compensation. These methods may not adequately address the needs of decentralized and decarbonized grids. To address this challenge, a group of researchers have proposed an innovative solution: the implementation of a reactive power market at the distribution level. This proposed market aims to cater to the requirements of modern grids by offering variable payments to compensate distributed generation (DG) units equipped with smart inverters. By utilizing a distribution-level Locational Marginal Price (d-LMP) mechanism, this market introduces increased spatial and temporal granularity in compensating DGs for their reactive power contributions. To validate the feasibility and effectiveness of this approach, a case study was conducted on the US New England grid using a modified IEEE-123 bus model with varying levels of DG penetration ranging from 5% to 160%. The results demonstrated that the proposed reactive power market could successfully accommodate high levels of DG penetration while ensuring stable revenue streams for reactive power services. In fact, it was found that inverter-based resources participating in this market could meet over 40% of reactive power load within a power factor range of 0.6 to 1.0. Additionally, DGs involved in the market stood to earn up to 11% of their total revenue from reactive power payments. Moreover, daily d-LMPs derived from this innovative market exhibited limited volatility, indicating its ability to provide consistent pricing signals for participants. The flexibility afforded by inverter-based resources further highlights the potential for these technologies to play a significant role in supporting grid operations and meeting network-level objectives while adhering to grid constraints. Overall, this research contributes valuable insights into reimagining reactive power compensation in decentralized and decarbonized grids through a novel distribution-level market mechanism. By addressing key areas such as price volatility and investment decisions, this approach holds promise for enhancing grid resilience and efficiency amidst evolving energy landscapes.