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Marginal Capacity Costs of Electricity Distribution and Demand for Distributed Generation

Marginal costs of electricity vary by time and location. Past researchers attributed these variations to factors related to electricity generation, transmission and distribution. Past authors, however, did not fully analyze the large variations in marginal distribution capacity costs (MDCC) by area and time. Thus, the objectives of this paper are as follows: (1) to show that large MDCC variations exist within a utility's service territory; (2) to demonstrate inter-utility variations in MDCC; and (3) to demonstrate the usefulness of these costs in determining demand for distributed generation (DG).

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Energy Specializations: Electricity – Local Distribution; Electricity – Distributed Generation; Electricity – Markets and Prices

JEL Codes:
D44 - Auctions
L94 - Electric Utilities
D42 - Market Structure, Pricing, and Design: Monopoly

Keywords: Electricity markets, distributed generation, electric utilities, marginal distribution capacity costs (MDCC)

DOI: 10.5547/ISSN0195-6574-EJ-Vol16-No2-6

Published in Volume16, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.