Improved Social Welfare through Market Event Compensation for Distributed Energy Resources

The increase in the penetration of distributed energy resources (DER) brings both challenges and opportunities to distribution and transmission systems. The challenges come in the form of infrastructure costs, loss of revenue (energy sale reduces as local resources support the demand), and the variable nature of distributed resources, leading to non-optimal operation. Efforts are being made by operators/policymakers of both transmission and distribution systems to develop methods for mitigating these effects in the future grid. This paper considers recent developments on both transmission and distribution systems and proposes a combined strategy to address the impact of increased DER penetration. The novelty of the proposed mechanism is the consideration of social welfare and fairness i.e., benefits to distribution utilities and end customers. The proposed strategy is tested on a Western Kansas utility network using real LMP data. In this work, rooftop solar was chosen as the representative of DER. The measured generation data from microgrid set up at Wichita State University was used for numerical analysis. The results show the improvement of social welfare when implementing the proposed compensation scheme.