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Li Chen Li Na
Research Center of Energy and Electricity Economics Research Center of Energy and Electricity Economics
North China Electric Power University North China Electric Power University
Beijing, 102206, China Beijing, China
tkhbdldx2006@yahoo.com.cn tkhbdldx2006@yahoo.com.cn
AbstractOne of the characteristics of smart grid is the large- pressure. Thus the distributed generation invested directly by
scale access of distributed generation to distribution network, distribution companies is still very limited. As a result, the
thus encouraging distributed generation investments is of great advantages of DG are not fully taken to ensure the long-term
significance to the construction of smart grid. A method of development and smooth operation of the distribution network.
economic compensation for independent distributed generation Therefore, it is necessary to stimulate independent investors to
investment in the distribution network is presented. First of all, invest in DG in the distribution network.
the reliability incremental value for the customers at different
load points and the saving value of distribution network Literature [2-4] analyzed the optimum planning question of
expansion investment for distribution companies, after the the distribution network taking the impact of distributed
incorporating of distributed generation, are concerned; and then, generation into account, and then determined the best location
the capacity compensation charge of the customers at different and volume of distributed generation in distribution network.
load points and the distribution company is calculated Although the results of the research on these optimum planning
respectively based on the benefit from the employment of questions can provide independent investors with certain guide
distributed generation. This method provides a price signal for information, they failed to form an effective economic
independent distributed generation investors in the distribution stimulation mechanism to encourage independent investors to
network and also stimulates investors for corresponding make DG investment in accordance with the optimal planning
investment, and plays a guiding role in choosing the right provided. Therefore, within the context of smart grid, it is
location and capacity of distributed generation. Finally, based on
necessary to establish an effective capacity compensation
a simplified distribution system, the article verifies the rationality
and feasibility of the capacity compensation method studied.
method to motivate independent DG investors to make
investment in the principles of optimal planning for the
Keywords-smart grid; distribution network; distributed distribution network considering the influence of DG.
generation; capacity compensation In the context of smart grid, the incorporation of DG into
the distribution network can bring two benefits. First, it can
I. INTRODUCTION improve the reliability at each load point near the DG, which
In recent years, the construction of smart grid has become a mainly benefit the users at these load points; secondly, DG
consensus in international power industry. One of the which located at the appropriate place can defer the investment
characteristics of smart grid is the large-scale access of in expansion of the distribution network, which will benefit
distributed generation (DG) to distribution network. distribution companies. This paper firstly proposes a
quantitative method to calculate the two benefits mentioned
At present, there are two different investment modes of the above, then on the principle of who benefits, who pays,
grid-connected distributed generation, one is invested by the designs a capacity compensation mechanism, in order to
distribution companies; the other one is by independent incentive independent DG investments under the overall
investors. If the distribution companies directly invest in a planning of distribution network.
large number of distributed generations, they will be faced with
high debt payment pressure and operation& maintenance
network), the average capacity of DG that the distribution Noting that the above compensation is paid on annual basis,
companies can reserve for peak shaving is CDG. Derived from there is no need to calculate the compensation per MW.
what is said above, we can get the equation
V. ANALYSIS OF EXAMPLE
as CDG = C peak C peak . Substituting this into (8), we can see as
Based on the distribution network test system given in
follows:
literature [1], we can verify the method of compensation
ISV = (UIC + UOC ) CDG (11) charge calculation proposed in this article. As is shown in
figure 1, the test system consists of a seven-section feeder,
Therefore, the credit for expansion postponement (CEP) of seven load points and a distributed generation. The distributed
distribution network which is paid to investors of the new generation is incorporated in the SE4 of the feeder with a total
distributed generation should be equal to investment saving capacity of 2MW and it is consist of two independent
value (ISV) in expansion of distribution network, seeing as generating units, so that it has a lower output state.
follows:
CEP = ISV (12)
Thus, in combination with (11), we can obtain that: CEP=
(UIC+UOC) CDG.
To sum up, the total credit (TC) for investors of the new
distributed generation should be:
TC = CRI + CEP
N
(13)
= Lav,i ( C,i rC,i L,i rL,i ) li + (UIC + UOC ) CDG
i =1 Figure 1. Examples of the power distribution system containing distributed
generation
B. Load charge for reliability improvement at different load
points
According to the different data of the feeder and the
Since the incorporation of a new DG could improve the reliability parameters of the DG given in literature [1], we can
reliability at each load point, the failure loss of users at get reliability indicators of each load point before and after the
different load points falls off. So for the users at load point LPi, access of DG, as is shown in TABLE.
the load charge (LC) they need to pay to independent DG
investors is as follows:
TABLE I. RELIABILITY INDICATORS OF EACH LOAD POINT BEFORE AND
AFTER THE ACCESS OF DISTRIBUTED GENERATION
LCi = SFi IRVi
(14)
= SFi Lav ,i ( C ,i rC ,i L ,i rL ,i ) li LPi C,i rC,i L,i rL,i
1 0.065000 5.0 0.065000 5.0
Where SFi is sharing coefficient between distribution 2 0.195000 10.0 0.194089 9.93
companies and users at load point LPi. SFi can be defined with 3 0.390000 15.0 0.358395 13.38
a interruptible load contract signed by load users and 4 0.455000 20.0 0.126424 7.36
5 0.487500 25.0 0.158924 12.36
distribution companies and it can be any value between 0 and 6 0.552500 30.0 0.196555 13.15
1.If the contract is a full interruptible load contract, then SFi=0, 7 0.585000 35.0 0.174317 13.94
and the distribution company have to compensate investors of
In addition, the compensation sharing coefficient at each additional compensation. This is equivalent to sending an
load point SFi, the average power cut loss li and the average economic signal to guide the rational DG volume.
load level at each load point Lav,i are shown in TABLE.
Based on the simple distribution network shown in Figure
1 (where DG is accessed in SE4 of feeder), we change the
TABLE II. OTHER INDICATORS AT EACH LOAD POINT location and volume of the DG to verify the economic signals
of the capacity compensation method.
LPi SFi li (ten thousand dollars/MW) Lav,i(MW)
1 1 0.155 0.310 First of all, we verify the economic signal effect of the
2 0.3 0.610 0.620 compensation method on the location of the distributed
3 0.9 0.263 0.930
4 0.5 0.461 0.310
generation. On the base of Figure 1, we assume that the
5 0 0.721 0.155 location of DG change (as shown in Figure 2, the real line
6 0.5 0.479 0.310 represents the original location, the dashed line represents the
7 0.5 0.380 0.155 changed location), while the access volume is still the same.
Using equations derived in this article, we can calculate Due to the changed location, the impact of the DG on load
the load charge of the users at each load point LCi and the load point reliability will change, which results in the change of the
charge shared by distribution company at each load point financial compensation. According to the quantitative method
LCDCi, the results shown in TABLE. of reliability value in this article, we can calculate the credit
for reliability improvement (CRI) when DG is at different
location, as well as the financial compensation (Total Credit,
TABLE III. THE LOAD CHARGE AND THE LOAD CHARGE SHARED BY
DISTRIBUTION COMPANY AT EACH LOAD POINT
TC), as shown in TABLE.
LPi LCi (ten thousand dollars) LCDCi (ten thousand dollars)
1 0 0
2 0.002575 0.006009
3 0.232167 0.025796
4 0.583753 0.583753
5 0 1.142494
6 1.03871 1.03871
7 0.531426 0.531426
We can learn from TABLE that, due to the reliability
improvement in distribution network, the compensation paid
to investors of independent DG is 57,000 dollars. Suppose that, Fig. 2 the simple distribution system example of DG at the different location
for distribution companies, the unit investment cost (UIC) is on Feeder
27,300 dollars per year per MW, the unit operating cost (UOC)
is 1,600 dollars per year per MW, and the average capacity
reserved for peak shaving which is designed by distribution TABLE IV. CRI AND TC WHEN DG IS ACCESSED IN DIFFERENT SECTIONS
OF THE FEEDER
company (CDG) is 2MW. Then we can obtain the
compensation paid by distribution company, due to the CRIten thousand TCten thousand
Location of DG
deference of expansion investment in distribution network, is dollars dollars
57,800 dollars. Thus, the total compensation (TC) paid to SE1 1.863 7.643
investors of independent DG equals to 114,970. SE2 2.019 7.799
SE3 4.582 10.362
If the investors change the location of DG on the feeder, SE4 5.717 11.497
the impact of DG on the reliability of each load point will SE5 5.813 11.593
change and thus the reliability value for distribution system SE6 5.960 11.740
SE7 5.801 11.581
differs. Therefore, we can see from the method of capacity
compensation in this article that, with the location change of We can see from the table above that, when the DG
DG on the feeder, the annual compensation for the DG volume remain unchanged, the access of DG in feeder SE6
investors will change correspondingly, which is equivalent to brings the maximum reliability value CRI for the entire
sending an economic signal to stimulate the correct location of distribution system. Therefore, from the perspective of the
DG. entire distribution system planning, SE6 is the best location for
independent DG. On the other hand, according to the capacity
In addition, the reserve capacity for peak shaving of DG is compensation method, we can see from TABLE that
designated by distribution companies, which is equivalent to investors can get the most economic subsidies (TC) when the
giving a standard volume for the planned DG. We can distributed generation is accessed at feeder SE6. Therefore,
conclude from the method of capacity compensation proposed from the perspective of independent investors, SE6 is the best
in this article that, on one hand, capacity investment is not place for the access of independent DG. This is equivalent to
economic for investors, if the capacity can not reach the providing an economic signal to guide the correct location of
standard, for it fails to maximize the compensation obtained independent DG, which will maximize the reliability value for
by investors; on the other hand, it is nonsense to invest beyond power distribution system and the economic compensation for
the capacity standard, for it can not provide the investors with investors.
Then, we verify the economic signal effect of the (3) Send an economic signal to guide the right location and
compensation method on the distributed generation volume. volume of the independent DG.
Assume that the distributed generation is still in SE4 but the
accessed capacity reduced to 1MW (CDG=1MW), while the It is necessary to point out that this paper focuses on the
reserve capacity for peak shaving designated by distribution proposal of financial compensation ideas and algorithms for
company is still 2MW. When the other conditions remain the investors of independent DG, in the practical
unchanged, the total compensation (TC) for the distributed implementation process, this method requires further
generation investors is 86,070 U.S. dollars. As can be seen, the refinement based on the actual situation, or even to make the
compensation for the DG investors decreases due to the necessary changes.
reduction of the access capacity of DG. On the other hand,
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