Designing Electricity Distribution Network Charges for an Efficient Integration of Distributed Energy Resources and Customer Response

Abstract

A significant transformation has been gradually taking place within the energy sector, mainly as a result of energy policies targeting environmental objectives. Consequently, the penetration of Distributed Energy Resources (DERs) has been escalating, including self-generation, demand side management, storage, and electrical vehicles. Although the integration of DERs may create technical challenges in the operation of distribution networks, it may also provide opportunities to more efficiently manage the network and defer network reinforcements. These opportunities and challenges impose the necessity of redesigning distribution network charges to incentivize efficient customer response. This PhD thesis focuses on the design of distribution network charges that send correct economic signals and trigger optimal responses within the context of active customers. First, a cost-reflective network charge is proposed that consists of a forward-looking locational component based on the network’s utilization level, which transmits the long-term incremental cost of network upgrades. Then, a residual cost component that recovers the remaining part of the regulated network revenues is proposed. The objective of the proposed network charge is to increase the system’s efficiency by incentivizing efficient short- and long-term customers’ reaction while ensuring network cost recovery. The Thesis presents an optimization model that simulates customers’ response to the proposed network charge in comparison to other traditional network charge designs. The model considers the operational and DER investment decisions that customers take rationally to minimize their total costs. Secondly, an evaluation methodology based on the Analytical Hierarchy Process technique is proposed in order to assess and compare different designs of network charges with respect to four attributes: network cost recovery, deferral of network costs, efficient customer response and recognition of side-effects on customers. Finally, a framework for Local Flexibility Mechanisms (LFM) is presented, complementing the proposed cost-reflective network charge. It aims to provide distribution-level coordination to mitigate unintended customer responses to network charges, by allowing customers to reveal their preferences and offer their flexibility services. It consists of a short-term LFM that utilizes customers’ flexibility in day-to-day network operation, and a long-term LFM that procures customers’ long-term flexibility to replace partially or fully network investments in network planning.