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Abstract
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Reactive power is one of the main characteristics that play a major role in power systems. When reactive flow is inadequate, the power system is confronted with voltage collapse and more than enough reactive power production follows the circulation in the network and consequently the occupation of power lines. On the other hand, power market evolves from centralised and vertically integrated structure to a competitive environment. The reactive power market is different from energy market and like others such as spinning reserve, frequency control and power system stabiliser is taken in the category of the ancillary service market. This paper reviews various mechanisms for pricing of reactive power in both levels of transmission and distribution (T&D) system. Additionally, the cost paid for reactive power service in the presence of distributed energy resources is analysed because of their high penetration in the power system, especially in distribution level.
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