Optimal Investment Planning for Distributed Generation in a Competitive Electricity Market

TLDR

The paper proposes a heuristic DG capacity investment model aimed at minimizing a distribution company’s investment, operating costs, and loss‑compensation payments. The method employs a bus‑wise hourly cost‑benefit optimization model to determine optimal DG sizing and siting under varying demand and price scenarios, considering both market auctions and fixed bilateral contracts. The heuristic substantially reduces computational complexity by eliminating binary variables in the optimization.

Abstract

This paper proposes a new heuristic approach for distributed generation (DG) capacity investment planning from the perspective of a distribution company (disco). Optimal sizing and siting decisions for DG capacity is obtained through a cost-benefit analysis approach based on a new optimization model. The model aims to minimize the disco's investment and operating costs as well as payment toward loss compensation. Bus-wise cost-benefit analysis is carried out on an hourly basis for different forecasted peak demand and market price scenarios. This approach arrives at the optimal feasible DG capacity investment plan under competitive electricity market auction as well as fixed bilateral contract scenarios. The proposed heuristic method helps alleviate the use of binary variables in the optimization model thus easing the computational burden substantially.