A practical methodology for distributed energy resources (DER) valuation in distribution networks

Under most NEM policies, DER customers sell excess electricity at full retail price. Although this structure helped the widespread growth of DER, it is argued to subsidize DER at the expense of non-DER customers. In that regard, value-based compensation emerged, and as of 2022, at least 12 states have conducted studies to investigate alternative NEM compensation methods to inform new policy decisions. DER can provide various benefits to the distribution system, including energy, reliability, resilience, environmental, societal, and investment deferral. Each benefit has an individual value, and calculating these values is challenging. This paper presents a practical methodology to calculate the DER location value. The proposed approach utilizes established utility planning and reliability criteria. It analyzes the distribution system's current status, capturing any planning or reliability criteria violations, and determines the utility upgrade investment costs to remediate them. The proposed approach then determines the size, locational, and temporal profile of the DER that can be added to the distribution network and defer any of the utility upgrade investment costs, thus obtaining the value to the system and assigning a monetary value. The results provide a nodal distribution value of DER to the distribution system.