Holistic regulatory framework for distributed generation based on multi-objective optimization

Abstract

Regulatory changes associated with distributed generation have occurred in several countries (e.g., the USA, Germany, the UK, and Australia). However, there is a lack of robust and holistic analytical models that can be used to implement the best regulatory framework among possible options. In this context, the present paper proposes a cutting-edge regulatory framework for distributed generation based on multi-objective optimization, taking into account socioeconomic (socioeconomic welfare created by the regulated electricity market and electricity tariff affordability) and environmental (global warming potential) indicators. Such indicators are modeled primarily based on the optimized tariff model (socioeconomic regulated electricity market model), Bass diffusion model (forecasting model of distributed generation deployment), and life cycle assessment (environmental impact assessment method). The design variables are assumed to be the regulated electricity tariff and remuneration of the electricity injected into the grid over the years. First, the proposed methodology is applied to fifteen large-scale Brazilian concession areas with a significant deployment of distributed generation assuming two approaches, a multi-compensation scenario, where the compensation is set individually for each concession area, and a single-compensation scenario, where the compensation is set equally for all concession areas. Then, the optimal solutions are compared to Ordinary Law 14300, which is a recently implemented regulatory framework for distributed generation in Brazil. Results demonstrate that Ordinary Law 14300 is a dominated or non-optimal solution since it is not located on the optimal Pareto frontiers for any of the assessed concession areas. Assuming the Euclidian knee points, benefits averaging 33% and 15% were achieved in terms of electricity tariff affordability for the multi and single-compensation scenarios, respectively, with small losses of 8% and 3% in terms of socioeconomic welfare and global warming potential. Though the proposed methodology is applied in the Brazilian context, it can also be applied to other countries with regulated electricity markets; thus, it is expected to be valuable for researchers, government institutions, and regulatory agencies worldwide.