Economic aspects of distributed generation

Operation and management of the distribution systems are becoming increasingly challenging issue due to the large penetration of distributed generations (DGs) and associated trading strategies in the deregulated environment. The incentives coming from the technical and economical fields in the deregulated market drive the distribution companies to consider DGs as a viable option to solve the lacking electric power supply problem. This paper proposes an approach for distribution company (DisCo) profit maximization through a cost-benefit analysis approach aiming at minimizing the DisCos investment and operating costs as well as the payments toward loss compensation and the power purchases from the main grid. Cost-benefit analysis is carried out for a time varying distribution load and the effect of the optimal DGs placement and network reconfiguration, on Discos profit margin is evaluated. Restriction on the DGs minimum capacity limit is considered and its effect on the profit is also highlighted. The optimal DG locations and the network reconfiguration results are obtained by the Monte Carlo simulations where the DGs number is fixed to four and the DG types considered are diesel generator and micro-turbine. The proposed approach is evaluated on the standard IEEE 33-node and 69-node distribution systems.