Economics of Grid-Tied Customer-Owned Photovoltaic Power Generation

Currently, there are only a handful of methods used to calculate prices for the energy generated from photovoltaic and other renewable resources. Some of these are netmetering, feed-in-tariffs, etc. However, none of the methods in use today are widely used. This paper will discuss a new methodology to calculate energy prices in the sense of locational marginal prices for future smart distribution systems with renewable energy resources as the primary energy supply. The scheme calculates the marginal energy price for renewable generations and storage, as well as the marginal congestion and loss prices in order to determine optimal economic operations in the system. This price, called the distribution location marginal price or DLMP, can be used as a pricing signal to achieve maximum system social surplus and environmental benefits by encouraging utilization of renewable distributed generation and energy storage in a competitive distribution market.