Locating Distributed Generator in the LMP-based Electricity Market for Social Welfare Maximization

Abstract

This article presents two new methodologies for the optimal placement of distributed generation (DG) in an optimal power flow (OPF) based wholesale electricity market. DG is assumed to participate in the real time wholesale electricity market. The problem of optimal placement, including size, is formulated for the objective of social welfare maximization. The candidate locations for DG placement are identified on the basis of locational marginal price (LMP). Consumer payment (CP), evaluated as a product of LMP and real power load for each load bus, is proposed as another ranking to identify candidate nodes for DG placement. The proposed rankings bridges engineering aspect of system operation and economic aspect of market operation and acts as a good indicator for the placement of DG in a market scenario. In order to provide a scenario of variety of DGs available in the market, several cost characteristics are assumed in a test system that are used to test the proposed methodologies. For each DG cost characteristic, an optimal placement and size is identified for maximum social welfare.