Locational Marginal Value of Distributed Energy Resources as Non-Wires Alternatives

Abstract

In this paper, we address the issue of valuating Distributed Energy Resources (DERs) as Non-Wires Alternatives (NWAs) against wires investments in the traditional distribution network planning process. Motivated by the recent literature on Distribution Locational Marginal Prices, we propose a framework that allows the planner to identify rigorously the shortterm Locational Marginal Value (LMV) of DERs using the notion of Marginal Cost of Capacity (MCC) of the best grid investment alternative to monetize hourly network constraint violations encountered during a yearly rate base timescale. We apply our methodology on two actual distribution feeders anticipated to experience overloads in the absence of additional DERs, and present numerical results on desirable LMV-based generic DER adoption targets and associated costs that can offset or delay different types of grid wires investments. We close with a discussion on policy and actual DER adoption implementation.

The Value of Distributed Energy Resources (DER) to the Grid: Introductionto the concepts of Marginal Capital Cost and Locational Marginal Value

“…The methodology proposed for determining the DER value to the grid should be efficient, accurate, and fair. Efficiency denotes maximizing the flexibility of the system and further deferring large investments to accommodate for changes in load [12]. As for accuracy, DERs should be compensated for services they provide to the distribution grid by addressing different characteristics and capabilities of different DER technologies as well as addressing differences in locational and temporal value of DERs.…”

A P2P-Dominant Distribution System Architecture

“…Therefore, to support this expansion, DLMPs must be extended to include capital costs, e.g. see the approach in [30].…”

Optimal Location of Distributed Energy Resources Considering Investment Costs, Use of Resources and Network Constraints

“…Scenario C includes residential and commercial loads. This scenario will be used for comparison with an alternative method [23] proposed in the literature. The objective is to demonstrate the advantage and functionality of controlling the use of resources through the use factor, and its weighting with α.…”

“…The most common way to find this value is through local marginal prices (LMPs) [22]. In [23], using the distribution LMPs, a method to identify the short-term value of DERs in the network is proposed. This translates into identifying the necessary injections at the nodes, and therefore the location of DERs, to correct overloads.…”