Optimal DG placement in power markets from DG Owners’ perspective considering the impact of transmission costs

•The DG placement problem has been solved from the DG owners' perspective based on locational marginal prices (LMPs).•The impact of transmission costs is considered in DG placement.•The contribution of DGs from the power flow is calculated using generalized generation/load distribution factors (GGDFs/GLDFs).•The transmission cost allocated to DGs is determined by the MW-Mile method.•The method provides DG owners with an effective tool to make optimal decisions. Among many studies proposed to solve the DG placement problem, only a few papers have addressed this issue from DG owners' perspective, none of which has taken the important role of transmission costs allocated to DGs into account. In this paper, optimal placement of DG units in an optimal power flow based wholesale electricity market with the aim of maximizing DG owners' economic benefits is carried out, with specific consideration given to transmission costs allocated to DGs. The proposed approach takes both production and transmission cost components into account in the DG placement process, so that in order to achieve the most optimal size and site of DGs from their owners' point of view, the problem of optimal placement is formulated for maximizing the DG owners' revenue while minimizing their allocated costs (production and transmission cost alike). Generalized load distribution factors (GLDFs) are used to determine DGs' share of the power flow, and transmission costs are allocated using the MW-Mile method. Finally, two criteria are proposed to identify suitable load buses for optimal DG placement. Two case studies based on IEEE 14-bus and IEEE 30-bus are used to demonstrate the applicability and validity of the proposed method.