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Operation and Control in a Competitive Market: Distributed Generation in a Restructured Industry

The prospect of independent ownership for distributed technologies is, being encouraged by the current deregulation of the industry, and it is possible that the new generators will be independently operated as well as independently owned. The siting of numerous small-scale generators in distribution feeders is likely to have an impact on the operations and control of the power system, a system designed to operate with large, central generating facilities. In response to the new and potentially conflicting economic and technical demands of a growing number of independent players, the power system may require new means for coordinating system operations. Price signals are one mechanism available to coordinate the operation of the power system in the emerging competitive market. This paper discusses the integration of distributed generation into the operations of the distribution system. It first discusses the engineering concern that numerous distributed generators might adversely impact system stability and reliability, and proposes methods to address these issues. The paper then demonstrates the ability of the distributed generators to participate in the competitive energy and ancillary services markets, by responding to a price signal that coordinates both the engineering and the economic aspects of distributed generator operation in a restructured power system.

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Energy Specializations: Energy Modeling – Integrated Assessment Modeling; Electricity – Distributed Generation; Electricity – Policy and Regulation

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q40: Energy: General, C58: Financial Econometrics

Keywords: Electricity, distributed generation, competition, small generators, ISO

DOI: 10.5547/ISSN0195-6574-EJ-Vol18-NoSI-6

Published in Volume 18, Special Issue of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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