Models for Quantifying the Economic Benefits of Distributed Generation

TLDR

Industry regulators often charge connection fees to distributed generator owners even though they save utilities money through deferred upgrades, reduced losses, and avoided wholesale purchases, highlighting the need for fair allocation of indirect benefits. We examine the most important economic benefits of distributed generation for utilities and the power system. Models are developed to quantify those benefits in economic terms. Quantifying and allocating the benefits to owners improves investment performance and promotes deployment of the most valuable distributed generation applications.

Abstract

We examine some of the most important economic benefits brought about by distributed generation technologies to the distribution utility and the power system. Models are developed that allow the quantification of those benefits in economic terms. In some cases, industry regulators or utilities charge connection fees to the owners of distributed generators, even if they are saving the local utility considerable amounts of money every year in deferred network upgrades, reduced losses, avoided wholesale market purchases and others. Efficient economic systems dictate that a proper share of the indirect benefits created by a given economic activity leads to overall optimal independent decision-making by its participants. Quantifying and allocating the benefits of distributed generation to the owners improves the economic performance of their investments and encourages the implementation of those distributed generation applications most valuable to the system.