Estimating and modeling of distribution network costs for designing cost-reflective network pricing schemes

Electricity prices in Australia have been rising fast, and they are expected to grow further. The price rises are largely driven by increased spending on electricity distribution network. With these developments, distribution network service providers (DNSPs) are under immense pressure to seek new ways to reduce costly investments in networks. Non-network alternatives (NNAs) or distributed energy resources (DERs) such as distributed generators (DGs), energy storage and demand response (DR) are considered as one of the promising option for deferring/avoiding these costly distribution network investments provided that they are implemented in the right places in the right time with the right profile of energy injections. However, NNAs are in very early stage of being adopted due to lack of a proper network tariff/incentive scheme that reflects true network cost/benefits of different loads and generation based on their location and profile of energy injection. Therefore, a cost-reflective network pricing/incentive can play a crucial role in promoting NNAs in right locations in the network and thereby to reduce the cost of electricity from the grid. In this context, this study proposes a methodology for estimating location-specific long run incremental cost/avoided cost of active distribution networks for the purpose of designing a cost-reflective network pricing/ incentive scheme.