Abstract
In the paper, the system loss sensitivity index that implies the incremental system loss with respect to the change of bus power is derived using optimization technique. The index λ reaches $\infty$ at critical loading point and can be applied to actual power systems for following purposes. 1) Evaluation of system voltage stability 2)Optimal investment of reactive power focused on minimizing system loss and maximizing system voltage stability 3)Optimal re-location of reactive power focused on minimizing system loss and maximizing system voltage stability 4)Optimal load shedding in case of severe system contingency focused on minimizing system loss and maximizing system voltage stability. Case studies for each application have proved their effectiveness.