Some advocates claim markets can help reduce electricity prices by changing the design of wholesale auctions. However, taking a pay-as-bid approach could make matters worse.
Synchronizing on West Point
Could local generators be used either to regulate voltage or control the power factor on distribution systems in New York?
Reactive power is becoming a hot issue in many regions of the country. Regulators and grid operators are grappling with ways to account fairly for reactive power supplies, and to encourage such resources to come online where they are needed. These analyses, however, are largely ignoring a vast fleet of infrastructure already installed on the network—namely, on-site generators and motors.
West Point military academy, for example, has four small synchronous generators that are used for combined heat and power or emergency power applications. If these generators also were used as synchronous condensers, they might supply additional revenue to pay for the distributed energy investment.
These engine generators already have been purchased, so the only costs in supplying reactive power would be the internal losses and some nominal equipment expenses.
Other options to control power factor is use of microturbines or adjustable speed drives. The payback on such solutions can be quite attractive, and merit a closer look as policy-makers consider how to account for reactive power.
The New York ISO and Reactive Power
Independent system operators (ISOs) are responsible for the operation of some of our large high-voltage transmission systems. ISOs are committed to reliability, the nondiscriminatory operation of the bulk power system, and to working with all stakeholders to create cost-effective and innovative solutions for the electric industry.
The New York Independent System Operator (NY-ISO) uses large, conventional generators connected to the transmission grid for providing reactive power. Payments are made from a pool consisting of total costs incurred by generators that provide voltage support service. The 2004 compensation rate was roughly $4,000 per MVAR per year. In addition, NY-ISO will pay a lost-opportunity cost when a generator is directed to reduce its real power output below its schedule in order to produce reactive power. NY-ISO is interested in sources for reactive power. In an August 2004 draft for discussion, the ISO staff proposed to market participants a set of modifications, including that:
- Reactive power be metered as net MVAR;
- The capability basis for compensation be the full demonstrated lagging and leading range as demonstrated by testing;
- All generators participating be required to test lagging capability; and
- The compensation rate be adjusted to reflect the new basis for compensation and range of control.
This document points out that synchronous condensers are not effectively compensated for voltage support service (VSS). “When a synchronous condenser is operating it requires an amount of real power; the cost of this energy, if acquired at market rates, could easily exceed the potential revenue from the VSS payment. Another limit to the potential revenue is that a synchronous condenser is not eligible for an ICAP (installed capacity) contract and would be compensated only for the actual hours of operation,” the document states.
The document recommends