Abstract
Two major contributions are discussed in this part of a two-part set. First, it presents a new concept of market reactive power requirement (Q(req)) for every participant in both bilateral and pool markets. This Qreq is defined as the reactive power loss allocation to each bilateral transaction using current adjustment factor (CAF) method that has been proposed in Part 1. When a transaction is allowed to provide reactive power more than its Qreq, it contributes to system reactive power needs and it is considered a reactive power provider. On the other hand, if it cannot produce its Qreq, it relies on other reactive power sources to ship its contracted power and it is considered a reactive power consumer even though it may generate some reactive power. The concept then is extended to participants in a pool market. Secondly, this paper proposes a new general concept of differentiated reactive power requirements for every participant in electricity markets. It assumes that Qreq of a participant depends on its allocated losses using any appropriate loss allocation method. The proposals help system operators and market participants to trade reactive power as well as real power effectively and fairly. The simulation results show validity and consistency of the proposals.