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

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  • Carvallo, Juan Pablo
  • Zhang, Nan
  • Murphy, Sean P.
  • Leibowicz, Benjamin D.
  • Larsen, Peter H.

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.

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  • Carvallo, Juan Pablo & Zhang, Nan & Murphy, Sean P. & Leibowicz, Benjamin D. & Larsen, Peter H., 2020. "The economic value of a centralized approach to distributed resource investment and operation," Applied Energy, Elsevier, vol. 269(C).
    • Handle: RePEc:eee:appene:v:269:y:2020:i:c:s0306261920305833
    DOI: 10.1016/j.apenergy.2020.115071
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    Cited by:

    1. López González, Diana María & Garcia Rendon, John, 2022. "Opportunities and challenges of mainstreaming distributed energy resources towards the transition to more efficient and resilient energy markets," Renewable and Sustainable Energy Reviews, Elsevier, vol. 157(C).
    2. Bandyopadhyay, Arkasama & Leibowicz, Benjamin D. & Webber, Michael E., 2021. "Solar panels and smart thermostats: The power duo of the residential sector?," Applied Energy, Elsevier, vol. 290(C).
    3. Pablo Carvallo, Juan & Bieler, Stephanie & Collins, Myles & Mueller, Joscha & Gehbauer, Christoph & Gotham, Douglas J. & Larsen, Peter H., 2021. "A framework to measure the technical, economic, and rate impacts of distributed solar, electric vehicles, and storage," Applied Energy, Elsevier, vol. 297(C).
    4. Zakeri, Behnam & Gissey, Giorgio Castagneto & Dodds, Paul E. & Subkhankulova, Dina, 2021. "Centralized vs. distributed energy storage – Benefits for residential users," Energy, Elsevier, vol. 236(C).
    5. Bistline, John & Blanford, Geoffrey & Mai, Trieu & Merrick, James, 2021. "Modeling variable renewable energy and storage in the power sector," Energy Policy, Elsevier, vol. 156(C).
    6. Gorman, Will & Barbose, Galen & Pablo Carvallo, Juan & Baik, Sunhee & Miller, Chandler & White, Philip & Praprost, Marlena, 2023. "County-level assessment of behind-the-meter solar and storage to mitigate long duration power interruptions for residential customers," Applied Energy, Elsevier, vol. 342(C).
    7. Stennikov, Valery & Barakhtenko, Evgeny & Mayorov, Gleb & Sokolov, Dmitry & Zhou, Bin, 2022. "Coordinated management of centralized and distributed generation in an integrated energy system using a multi-agent approach," Applied Energy, Elsevier, vol. 309(C).
    8. Sheha, Moataz & Mohammadi, Kasra & Powell, Kody, 2021. "Techno-economic analysis of the impact of dynamic electricity prices on solar penetration in a smart grid environment with distributed energy storage," Applied Energy, Elsevier, vol. 282(PA).

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