The economic value of a centralized approach to distributed resource investment and operation

The economic value of a centralized approach to distributed resource investment and operation

TitleThe economic value of a centralized approach to distributed resource investment and operation
Publication TypeJournal Article
Year of Publication2020
AuthorsJuan Pablo Carvallo, Nan Zhang, Sean Murphy, Benjamin Leibowicz, Peter H Larsen
JournalApplied Energy
Volume269
Date Published07/2020
Abstract

Distributed energy resources have been almost exclusively deployed and operated under a decentralized decision-making process. In this paper, we assess the evolution of a power system with centrally planned utility-scale generation, transmission, distribution, and distributed resources. We adapt a capacity expansion model to represent both centralized and decentralized decision-making paradigms under various electricity rate structures. This paper shows that a centralized planning approach could save 7% to 37% of total system costs over a 15-year time horizon using a Western United States utility as a case study. We show that centralized decision-making deploys substantially more utility-scale solar and distributed storage compared to a decentralized decision-making paradigm. We demonstrate how a utility could largely overcome the complications of decentralized distributed resource decision-making by incentivizing regulators to develop electricity rates that more closely reflect time- and location-specific, long-run marginal costs. The results from this analysis yield insights that are useful for long-term utility planning and electric utility rate design.

Notes

This is a pre-print copy, printed with permission, of an article published in Applied Energy. The published version can be found here

URLhttps://www.sciencedirect.com/science/article/abs/pii/S0306261920305833
DOI10.1016/j.apenergy.2020.115071