Reactive power pricing in distribution networks

Abstract

Tariffs for electricity including these for reactive energy are a significant tool for raising energy efficiency in the economy. This paper focuses on practical reactive energy tariff formation in distribution networks under deficient primary information providing meanwhile sufficient revenue for the distribution utility in order to fulfil efficient transfer service and encourage adequate reactive power compensation by customers. Reactive energy pricing principles are observed and an overview of the reactive energy and power tariff structures implemented around the world is included. The article presents a simplified methodology of reactive energy pricing for practical use. The price for reactive energy consumed from the distribution network is expressed as the sum of the price of reactive energy consumed from the transmission network and the price of distribution network transfer service, which is complemented with a profit margin for the distribution network, excise tax and value-added tax. The paper delivers a practical calculation method for the variable and fixed components of reactive energy transfer service. © 2011 Estonian Academy Publishers.