Voltage control in a changing US electricity industry

As the US electricity industry is restructured, the generation, transmission, and system-control equipment and functions that maintain voltages within the appropriate ranges are being deintegrated. These changes in industry structure require new institutional rules and markets to plan for additional voltage-support capacity, to reserve capacity for future use, and to deploy capacity in real time to meet current and contingency conditions. These services can be obtained through engineering mandates or through markets. Whether the location-specific nature of voltage control will permit the creation of competitive markets is not yet known. Voltage control is accomplished by managing reactive power on an alternating-current power system. Reactive power can be produced and absorbed by both generation and transmission equipment. Reactive-power devices differ substantially in the magnitude and speed of response and in their capital costs. System operators, transmission owners, generators, customers, power marketers, and government regulators need to pay close attention to voltage control as they restructure the US electricity industry. When generators are required to supply excessive amounts of reactive power, their real-power production must be curtailed. These opportunity costs are not currently compensated for in most regions. Current tariffs are based on embedded costs. These embedded-cost tariffs average about $0.51/MWh, equivalent to $1.5 billion annually for the United States as a whole. Although this cost is low when compared with the cost of energy, it still aggregates to a significant amount of money. This paper explains why power systems require reactive power. It then examines the various types of generation and transmission resources used to supply reactive power and to control voltage. Finally it discusses how these resources are deployed and paid for in several reliability regions around the country.