Impacts of distributed generation on electricity market
1. Impacts of Distributed Generation
on Restructured Power System
Harsh Dhiman
Faculty of Technology & Engineering
The Maharaja Sayajirao University of Baroda
2. Introduction
• Distributed Generation playing an important role in
the electricity paradigm of the world. In India also
DG is form of renewable energy resources
contributing to the Indian power sector.
• As the INDIA addresses the challenges of achieving
energy sustainability in the 21st century, the
recognition of the need to find alternatives to current
practices is surely found in implementing Distributed
Generation
3. Distributed Generation: An Overview
• According to Distributed Power Coalition of America
(DPCA) : Distributed power generation is any small-
scale power generation technology that provides electric
power at a site closer to customers than central station
generation.
• A distributed power unit can be connected directly to
the consumer or to a utility's transmission or distribution
system.
4. • According to Institute of Electrical and Electronic
Engineers (IEEE) : Distributed resources are the
sources of electric power that are not directly connected
to a bulk power transmission system.
• The Distributed Resources includes generator and
energy storage technologies.
• The technologies generally include engines, small
(including micro) turbines, fuel cells and
photovoltaic.
5. Distributed Generation Characteristics
• Connected directly to the distribution system or
installed at the customer's side of the meter.
• Not dispatched by network operators as in the case of
centralized trading.
• Small scale generation <300 MW
• The connection of DG to the power system could
improve the voltage profile, power quality and
support voltage stability
7. Size of Distributed Generation
Types of DG Capacity
Micro Distributed Generation <5kW
Small Distributed Generation 5kW-5MW
Medium Distributed Generation 5MW-50MW
Large Distributed Generation 50MW-300MW
9. Issues related to Distributed
Generation
• Power quality and reliability are a bigger issue as the
DG’s installed locally tend to produce harmonics and
hence hamper the power quality of the grid.
• Bidirectional flow of power along with distorted
voltage profile.
• Diminishing stabilizing inertia.
• Short circuit levels are changed when a DG is
connected to the network. Therefore, relay settings
should be changed
10. Technical Solutions for DG Issues
• Use of FACTS devices like SSC, D-STATCOM and
UPFC and Wide Area Monitoring Systems
(WAMS).
• DG can be used as a back up supply, though it is
limited in case of Solar powered generation during
night time.
• But can be used as an effective tool to store energy
in SMES (Superconducting Magnetic Energy
Storage).
11. Distributed Generation : An Upcoming
Trend
• Distributed generation has seen a recent spur in its
installation in distribution network in European
countries like Denmark, Holland, Finland and in
India up to an extent as well.
• DG share is usually calculated by an index known as
penetration index and is given as :
Penetration Index = (ΣPDG / ΣPL ) x 100%
ΣPDG = Power injected in the network by DG’s
ΣPL = Feeder Capacity
12. • The high costs of wind and solar generation are the
most important barriers for their market
penetration.
• The capital cost of solar PV is even higher.
However, considering only the cost of DG may not
give a comprehensive picture of the problem.
• Since a number of other benefits of DG, such as
the environmental benefits and reduced
transmission losses, may have been neglected
13. Optimization of Distributed Generation
• Another frequently mentioned benefit of DG is its
potential effect on deferring transmission network
investments.
• Before the market deregulation, transmission
network expansion is conducted sorely by the power
utility and is usually modeled as an optimization
problem.
• This aims at minimizing expansion investments
subject to system reliability and other technical
constraints
14. Market Scenario
• In a market environment, transmission network
expansion may also involve other objectives, such as
enhancing market competition, minimizing network
congestion and facilitating the integration of
renewable energy sources.
• A number of technical constraints should be carefully
modeled in transmission expansion models. The most
fundamental ones are power flow constraints, which
represent the physical laws transmission systems
must obey.
15. • To quantitatively measure the impact of DG on
transmission network expansion, it is important to
determine what portion of the overall transmission
expansion investment should be allocated to DG
units.
• A number of transmission cost allocation methods
have been proposed in the literatures. Two methods,
postage-stamp rate method and contract path method
have been widely used because of their simplicity.
16. Closed Loop Pricing
• The price signal introduced in distributed
generation is a closed loop signal (i.e. one that
incorporates feedback) rather than an open loop
signal, as most price signals in the electric supply
industry are today.
• One objective in introducing a closed loop price
signal to the generation sector is to aid in the
creation of the desired competitive market.
17. • A closed loop price signal will capture the market
clearing dynamic of a competitive market in the
dynamics of the feedback control, and so incorporate
market prices into system control decisions as well as
in sitting and investment decisions.
• A second goal of the price signal is to provide a
decentralized control mechanism which allows each
generator to operate independently while also
providing an incentive for the generators in aggregate
to produce at the efficient level.
18. • The price signal facilitates the creation of a
decentralized system in which distributed generators
are free to act independently, required neither to give
control nor any private information to a centralized
authority.
• The objective of the price model is to demonstrate
that a market-based price signal can be used in
conjunction with the existing bulk flow market price
to successfully control and coordinate a distribution
system.
19. Closed loop price model
• In the proposed price framework the basic piece of
information communicated to the distributed
generators from the ISO and the market
coordinator (or Power Exchange, PX) is the spot
price of energy and/or services.
• This spot price corresponds to the price of the
scheduled power flows as determined by the ISO
and PX.
20. Pricing in Distributed Markets
• The full price of energy in the market can thus be
expressed as
ρbase ± Δρ
• where Δρ is the quantity determined by the price
based control loop and ρbase is the spot price of the
scheduled, bulk power flows.
21. • The price signal can be operated in a flexible time
scale. Every k minutes the market or system price,
ρbase , is updated to reflect the current price of power
delivered to the distribution system.
• The closed loop price signal corresponds to the
marginal revenue earned by a participating distributed
generator, and as dictated by economic theory the
competitive suppliers will produce at the level where
their marginal cost equals marginal revenue.
22. • The market structure envisioned in this model
assumes that a competitive market will be developed
at the distribution level.
• The distributed generators will be allowed not only to
enter into contracts at the wholesale and retail levels,
and participate in the Power Exchange, but also
provide ancillary services to the ISO and local
customers on a competitive basis.
24. Ancillary services
• Various ancillary services provided by the DG’s are
1) Voltage support
2) Reactive power compensation by FACTS
3) Black start
4) Spinning reserve.
25. Relevance of Distributed Generation in
India
In India, distributed generation has found three distinct
markets.
• Back-up small power generation systems including
diesel generators that are being used in the domestic
and small-commercial sectors.
• Stand-alone off-grid systems or mini-grids for
electrification of rural and remote areas.
• Large-captive power plants such as those installed by
power intensive industries.
26. Conclusion
• Thus we can say that flexibility of DG allows the
market participants to respond to changing market
conditions, i.e. due to their small sizes and the short
construction lead times compared to most types of
larger central power plants.
• Also the distributed systems can be coupled with the
micro-grid systems which are small scaled and often
require lower gestation periods, it enables faster and
easy capacity additions when required.
27. References
• Integrating Small Scale Distributed Generation into a
Deregulated Market: Control Strategies and Price Feedback by
Judith Cardell and Marija Ili´, Massachusetts Institute of
Technology.
• Investigating the Impacts of Distributed Generation on
Transmission Expansion Cost, An Australian Case Study,
Energy Economics and Management Group School of
Economics, University of Queensland
• Distributed Generation : Benefits and issues , KU Leuven,
Netherlands
