Abstract: | This paper presents FACTS device allocation for market‐based power systems. The purpose of the FACTS installation is to provide benefit for all entities. Therefore, we use a concept of minimizing expected security cost (ESC), implying to maximize social welfare, to minimize operating reserve, and to minimize load interruption in annual basis. The FACTS device investment cost is also taken into account. The ESC considers operating cost under normal state and contingencies along with their associated probabilities to occur. Annual basis bid data is used to compute ESC as well as the cost data for load interruption and reserve procurement. This paper also considers control actions among multiple FACTS device to achieve minimum ESC. To solve the overall problem, particle swarm optimization is utilized to obtain optimal FACTS device allocation as main problem while sequential quadratic programing is used to solve optimal power flow as suboptimization problem. © 2011 Institute of Electrical Engineers of Japan. Published by John Wiley & Sons, Inc. |