Engineering Economics of Microgrid Investments

An efficient approach for the economic assessment of microgrid planning is proposed in this chapter. The microgrid cost saving, obtained by the deployment of local resources and selling the excess power to the main grid, is compared with the investment cost to exhibit the economic benefits. Using this model, the optimal mix of distributed energy resources (DERs) to be installed in a microgrid is obtained. The proposed model considered a microgrid with multiple DERs and also multistep price functions. The computational complexity in the long‐term microgrid planning problem is alleviated by a few assumptions, which simplify the calculations. The proposed model is graphically represented, which offers a quick and efficient assessment of the microgrid installation's economic benefits. The model is proposed for microgrids employing a single DER and extended to microgrids with multiple DERs. A stochastic model is used to ensure the practicality of the proposed model. Numerical simulations exhibit the effectiveness of the proposed model. The proposed models can be used for analyzing the microgrid economic development and accordingly, determine the optimal size and combination of DERs to be installed. The proposed model alleviated the need for complex calculations, hence, allowing a fast and efficient study of microgrid planning. The obtained result showed that the economic benefit of a microgrid was independent of the microgrid size. That means, microgrid economics only depends on the characteristics of installed DERs (i.e. annualized investment cost and generation price) and the market price.