Cutting-edge public policy proposal to maximize the long-term benefits of distributed energy resources

Abstract

In the context of increasing integration and relevance of distributed energy resources, this paper proposes an advanced public policy to maximize their long-term benefits through optimal regulated electricity market management. More specifically, the focus is on renewable distributed generation and energy storage systems. The proposed policy arises from three models or techniques, i.e., the optimized tariff model (regulated electricity market model), Bass diffusion model (long-term forecasting of the integration of distributed energy resources), and random walk (risk assessment technique), along with a stochastic optimization problem. The policy leads to socioeconomic welfare maximization while ensuring fairness for all the market players and enhanced control by the regulatory agency on the integration of distributed energy resources. By applying the policy to a concession area located in northeastern Brazil, where photovoltaic distributed generation systems dominate the market share, results demonstrate that it is highly valuable as a 156 (MR$) mean socioeconomic welfare gain was achieved when optimizing the design variables (compared to a non-optimal solution).