Calculation of cost and benefits to the distribution network of embedded generation

Although a number of technical challenges related to the integration of embedded generation (EG) and power systems are yet to be addressed, the main area which requires urgent attention is commercial interaction between EG and power networks. It has been recognised that the present arrangements and mechanisms for pricing of distribution services do not treat EG adequately or systematically. The commercial issues related to charges for losses, connection and use of the distribution and transmission networks have been the subject of negotiations between local distribution utilities and EG companies, where many different arguments have been used in different contexts to address essentially very similar questions. Even the guidance provided by the Regulator may be inconsistent as a firm stand point from which the quantification of the impact of EG on system costs, and corresponding cost/benefit allocation can be considered, has yet to be established. This paper describes some of the main problems that the present pricing arrangements face and presents a framework for the development of a more equitable network pricing concept. Several frequently debated issues such as deep and shallow based charging for connection of EG, loss allocation, existence of negative use of system charges are discussed as an application of the proposed concept.