Methodology for Cost Reflective Pricing of Distribution Networks with Distributed Generation

This paper discusses distribution network pricing and the critical role that it plays in the economic and technical integration of distributed generation (DG) into power systems. The central point of DG integration is first of all to quantify the extent to which different DG technologies can replace network assets as well as the extent to which DG can be said to drive investment in network capacity. It is argued that the way to realise economic and technical integration of DG into the power system in an efficient and consistent way is through network pricing. A network pricing methodology based on the concept of economically adapted networks and forward looking investment costs is proposed. The key features of the methodology are illustrated with the aid of a simple example.