Pricing of distribution networks with distributed generation: Application of nodal pricing

In this paper we apply a nodal distribution pricing methodology to two different radial distribution test systems, in order to assess its performance under different systems' loading conditions, with the presence of distributed generation. The pricing methodology consists of two elements: i) used capacity element, as the relation between the equivalent annual cost and the power flow of the circuit, to reflect the use of the circuit; and ii) unused capacity element, based on the long run incremental cost approach, to reflect the impact on the advancement or deferral of future investment in network components as a result of an injection or withdrawal of generation or load at each study node. The location and capacity of distributed generation are strategically selected, based on the distribution system performance, to evaluate the most significant scenarios in the network. The methodology is applied to the IEEE 13 and 34 nodes radial distribution test feeders. Analysis and simulations show that the methodology reflects each agent's use of network, and its impact on future investments.