In this paper a novel non-linear optimization problem is formulated to maximize the social welfare in restructured environment with generalized unified power flow controller (GUPFC). This paper presents a methodology to optimally allocate the reactive power by minimizing voltage deviation at load buses and total transmission power losses so as to maximize the social welfare. The conventional active power generation cost function is modified by combining costs of reactive power generated by the generators, shunt capacitors and total power losses to it. The formulated objectives are optimized individually and simultaneously as multi-objective optimization problem, while satisfying equality, in-equality, practical and device operational constraints. A new optimization method, based on two stage initialization and random distribution processes is proposed to test the effectiveness of the proposed approach on IEEE-30 bus system, and the detailed analysis is carried out.
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