As distributed generation (DG) becomes more widely deployed distribution networks become more active and take on many of the same characteristics as transmission. We propose the use of nodal pricing that is often used in the pricing of short-term operations in transmission. As an economically efficient mechanism, nodal pricing would properly reward DG for reducing line losses through increased revenues at nodal prices, and signal prospective DG where it ought to connect with the distribution network. Applying nodal pricing to a model distribution network we show significant price differences between busses reflecting high marginal losses. Moreover, we show the contribution of a DG resource located at the end of the network to significant reductions in losses and line loading. We also show the DG resource has significantly greater revenue under nodal pricing reflecting its contribution to reduced line losses and loading.
In this paper we propose a method for the allocation of fixed (capital and non-variable operation and maintenance) costs at the medium voltage (MV) distribution level. The method is derived from the philosophy behind the widely used MW- mile methodology for transmission networks that bases fixed cost allocations on the “extent of use” that is derived from load flows. We calculate the “extent of use” by multiplying the total consumption or generation at a busbar by the marginal current variations, or power to current distribution factors (PIDFs) that an increment of active and reactive power consumed, or generated in the case of distributed generation, at each busbar, produces in each circuit. These PIDFs are analogous to power transfer distribution factors (PTDFs).
Unlike traditional tariff designs that average fixed costs on a per kWh basis across all customers, the proposed method provides more cost reflective price signals and helps eliminate possible cross-subsidies that deter profitable (in the case of competition) or cost-effective (in the case of a fully regulated industry) deployment of DG by directly accounting for use and location in the allocation of fixed costs. An application of this method for a rural radial distribution network is presented.