1

Abstract — Recently, the new concept of microgrid (µG) has been emerging on distribution networks as a way to ease the integration of micro generation in LV networks and increase reliability. A µG is an association of a low voltage distribution network, small modular generation systems (micro-generators), loads and storage devices having some local coordinated functions. This entity can operate in two different modes: interconnected or emergency. In the first mode, the microgrid is connected with the distribution network, importing or exporting electricity and/or ancillary services. When in emergency mode, the microgrid operates isolated from the distribution network and uses local resources, changing from power control to frequency control and, if necessary, shedding load.

A micro grid will only be established if its promoters achieve sufficient advantages that justify the incurred costs, namely the investment, operation and maintenance costs. The main purpose of this paper is to identify all the relevant costs and benefits and build a decision model for the situation, taking into account the regulatory framework, which is essential for the definition of some of the benefits. The paper also shows how to include in the evaluation the risk associated to the uncertainties in data and parameters.

An illustrative example is included that shows a possible situation of equilibrium between global costs and benefits.

Index Terms — Microgrid, reliability, micro generation, economic analysis, regulation, uncertainty

I. INTRODUCTION n the last decades, the interest on distributed generation has been increasing, essentially due to technical developments

on generation systems that meet environmental and energy policy concerns. The interconnection of distributed generation has been predominately confined to MV and HV levels, but the development of micro generation technology, the decline of its costs and the public incentives to distributed generation lead to an increased installation of micro generation in LV networks.

Although there is in general a lack of regulations to frame the operation of micro generators [1], in some countries, like

P. M. Costa (paulomoises@elect.estv.ipv.pt) is with ESTV - School of

Technology of Viseu, Polytechnic Institute of Viseu, Campus Politécnico de Repeses, 3504-510 Viseu.

M. A. Matos (mmatos@inescporto.pt) is with INESC Porto – Instituto de Engenharia de Sistemas e Computadores do Porto, Campus da FEUP, Rua Dr. Roberto Frias, nº 378, 4200-465 Porto, Portugal. Phone: +351.222094230 Fax: +351.222094050 and FEUP – Faculdade de Engenharia da Universidade do Porto.

Portugal, there is already specific legislation about micro generation. This legislation is intended to encourage the investment on micro generation, namely by subsidizing the remuneration of the electricity produced by these generators and partially funding the investment.

The simple integration of micro generation in LV networks, similar to the one that is being used to integrate distributed generation on MV networks [1], may result in technical problems on LV and MV networks (excessive voltages, increase in fault levels, voltage unbalance, overloading, etc.), namely when the penetration of micro generation becomes high [2][3]. The new concept of microgrid (µG) emerged as a way to ease this integration, but in fact corresponds to an entirely new way of understanding LV networks, with potential benefits far beyond the easy integration of microgeneration [5]-[8].

A microgrid is an association of a low voltage distribution network, small modular generation systems (micro-generators), loads and storage devices having some local coordinated functions [4][8]-[10]. This entity can operate in two different modes: interconnected or emergency. In an interconnected mode, the microgrid is connected to the distribution network, importing or exporting electricity and/or ancillary services. When in emergency mode, the microgrid operates isolated from the distribution network and uses local resources, changing from power control to frequency control and, if necessary, shedding load.

The main purpose of this paper is to identify the relevant costs incurred when establishing a µG and the benefits that result from potential reliability improvements, as well as to build a decision model for the situation. Contributions to account for the risk associated to the uncertainties in data and parameters are also given.

In the next section the reasons that may justify the development of a µG are presented. In sections III and IV the benefits and costs of establishing a µG are described while uncertainty issues are addressed in section V. An illustrative example is included in section VI. The conclusions and references complete the paper.

II. MICROGRID DEVELOPMENT As mentioned previously, micro generation systems are

emerging on LV networks. In some countries, financial support mechanisms were developed in order to induce investment on those systems [1]. In Portugal, the investment on micro generation systems is subsidized as well as the tariffs paid for generated electricity exported to distribution network.

Paulo Moisés Costa , Manuel A. Matos, Member, IEEE

Economic Analysis of Microgrids Including Reliability Aspects

I

9th International Conference on Probabilistic Methods Applied to Power SystemsKTH, Stockholm, Sweden – June 11-15, 2006

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The tariffs are subsidized adopting an avoided cost strategy (environmental, losses and investments costs). Different tariffs are paid for generated electricity according to micro generation technology (PV, wind turbine, fuel cell, micro turbine, etc).

As a result of the incentives policy an increase in the penetration of LV power sources is expected in the next years. This will bring technical problems to LV as mentioned previously. The concept of µG may help leading with those problems. Moreover, the µG can also bring advantages to its participants, namely related to reduction of energy costs (electricity and heat), the improvement of the reliability of the electric network [4], the value of ancillary services, the deferral of investments in the distribution network, and the reduction of network losses. Social benefits could also be pointed out such as the environmental performance and the lower exposition to catastrophic failures in the power system, whatever their origin is.

However, the development of a µG depends on its potential promoters or, more precisely, on the advantages these promoters can achieve. The consumers and generators inside a LV network may act as promoters of its conversion into a µG. This happens when the µG allows reducing the energy bill of consumers (combined cost for electricity and heat), increase the electricity sales of micro generators, and improve the reliability of electricity supply.

Retailers and energy services companies (ESCO) may also promote this µG association as a way of selling energy with heterogeneous reliability. As well, the distribution operator may be a promoter of those µG if the obtained advantages (loss reduction, investments deferral, reliability improvement) surpass the disadvantages (potential reduction on income resulting from network usage tariffs and possible costs related to µG to be supported). Note that, depending on the regulation in force, the distribution utility may be excluded from the set of possible promoters of µG to ensure the independency between the network and energy businesses.

III. ECONOMIC ANALYSIS Prior to the establishment of a µG, the potential promoters

must analyze the soundness of the project by performing a feasibility study involving technical and economical issues.

In this paper we address only the assessment of economic performance of a µG created by evolving a LV network, with micro generation already installed (fig. 1). The objective is to assess the economic value resulting from the ability of µG to operate isolated from the upstream network, after an external outage. Thus, we are not addressing the specific problem of investing (or not) in microgeneration [11][18], but our conclusions may also be useful for such an analysis.

A. Cost of establishing the µG To establish a µG by evolving an existing LV network,

some investments must be done, namely in management and control equipment, communication systems, energy storage devices and suitable protection schemes (supposing no more micro generation is added), as listed in Table I and explained below.

MV network

...

D1

D2

DMT

Wind turbinePV Micro turbine

MV network

...

D1

D2

DMT

Wind turbinePV Micro turbine

Figure 1 – LV network containing individual micro generation

TABLE I

INVESTMENT NEEDS FOR A MICROGRID Device Quantity

MicroGrid Central Controller 1

Microgenerator Controller 1 for microgenerator

Load Controller 1 for consumer

LV protection devices 1 circuit breaker for each LV branch

Protection of MV grid / µG interface

1 static switch with protection relays

Communication system

Storage System (Flywheel)

The management and control equipment includes the

MicroGrid Central Controller (MGCC), the MicroSource Controllers (MC) and the Load Controllers (LC) [1][7][16]. The MC devices make a local control of the active and reactive power generation of micro generators and storage systems. The LC devices control the loads by disconnecting them (total or partially) when necessary. The MGCC manages the µG, providing the set points to LC and MC, in order to achieve a suitable technical and economical operation [1][7][16]. To accomplish this mission, a communication system between MGCC, LC and MC must exist. This system is not expected to be very expensive, once the time constants in power systems are lower than in communication systems (so a low bandwidth system is required) [14]. A Power Line Carrier system (PLC) may be used in some circumstances.

The capability of energy storage is a crucial requirement for the success of islanding and subsequent isolated operation of a µG. In fact, the low kinetic energy of micro generators imposes some form of temporary and fast response power injection system, in order to maintain voltage and frequency within limits [14][15].

There are a number of types of energy storage devices that could be used to provide transient support, namely SMES (Superconducting Magnetic Energy Storage), batteries, flywheels, super capacitors, etc. In [14], flywheels are mentioned as a very strong contender due to its costs, steady state losses, energy density, power density and cycling capability. Note that, in this work, the stored energy is only

9th International Conference on Probabilistic Methods Applied to Power SystemsKTH, Stockholm, Sweden – June 11-15, 2006

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intended to support the voltage and frequency regulation, which means that no energy is stored in order to be used to supply load when energy shortfall exists.

Usually, the micro generators inside a µG are connected to the grid through power electronic interfaces. As a consequence, when the µG operates in isolated mode, fault currents are not so high as required by traditional protections, so a suitable protection scheme is needed [16][17]. This means that the protection of LV branches based on fuses should be replaced by a protection based on circuit-breakers (possibly communication-capable).

Also, a static switch must be installed on the interconnection point between the µG and the MV network. This device should ensure a high speed isolation of the µG on situations where this is needed (namely when an upstream network outage occurs). The control signals to this static switch come from relays monitoring the current magnitude and direction on each phase, voltages and possibly power quality issues.

Besides the investment (including project and installation costs), operation and maintenance costs must also be accounted for in the economic analysis. The maintenance costs are only related to the new equipments installed in order to establish the µG. The costs of operation result from the operation of the µG and include losses in storage systems, staff, etc.

Note that only the costs resulting from the establishment of the µG are considered. Each micro generator and load remain responsible for its own costs (fuel, maintenance, operation) as before the establishment.

B. Benefits of establishing a µG Considering the purpose of this paper, the benefits that

result from setting up a µG from an existing LV network with microgeneration come from the ability of isolated operation of this entity after an interruption on the upstream network. This brings potential benefits to the consumers and micro generators inside the µG, as well as to the distribution operator. For the moment, we disregard potential reliability related benefits to consumers external to the µG (see [4] for an identification of these benefits).

The discussion of the benefits is separated by agent, once the decisions are made by each agent taking into account its own costs and benefits, and not some kind of “global benefit”. However, it is possible, after the correct identification of benefits, to create schemes to share costs between players, in order to ease the setting up of the µG.

Consumers’ benefits

Benefits to consumers exist because some or all of them will remain supplied by the internal generation of the µG after an outage of upstream network. The economic value of these benefits depends on:

i) the number and duration of upstream outages [19][20]; ii) the ratio between internal load and internal generation

of the µG after the upstream outage [4]; iii) the worth of non delivered energy (NDE) to consumers

inside the µG, which may depend on the kind of consumers (residential, commercial, industrial, services) [12][19][20];

iv) the loads that are supplied in situations of energy shortfall (load shedding policy of the µG);

Once the energy generated by micro generators varies along the time (for instance PV generation is greater in summer than in winter and the opposite may occur with some micro CHP systems, due to variation in heat needs), the economic assessment of benefits is more accurate if the year is divided into periods.

This division also allows accounting for the potential different values of the failure rate and restoring time of the upstream network along the year, as well as for load variations.

Assuming p periods, the annual economic consumers’ benefit (VANDE) that results from increased reliability [4], is given by:

( )∑ −××−=p p

p

aMp

uppupANDE PV

TWTPrV )(λ (1)

where (in each period p): λup is the interruption rate of the upstream network; rup is the average restoring time of the upstream network after a default; Wp/Tp is the average power generated by micro generators in period p. and: PM is the probability of the µG failing to isolate from the MV network following an interruption; Ta is the mean time to restore the µG after a complete shut down; V is the average value of ANDE (Avoided Not Distributed Energy). P is the energy tariff paid by consumers when the µG is isolated (see section of micro generators’ benefits).

Note that, if different worth values of ANDE are to be

considered for different classes of consumers, equation (1) must be changed accordingly. This change must also account for the load shedding policy of the µG when situations of energy shortfall take place. Micro generator’s benefits

The most evident benefit that setting up a µG brings to micro generators is the additional revenue from potential extra energy selling. This extra energy results from the fact that, when the µG operates in isolated mode, the micro generators can remain selling their electricity. So, again, we are not dealing with the basic economic equilibrium of the microgeneration business, but only with the impact of the new µG.

In the same conditions of (1), the value of annual non lost generation (VNLG) of micro generators can be obtained by:

∑ ∑ ⎟⎟⎠

⎞⎜⎜⎝

⎛∆−××−=

p

pG

GG

p

pG

aMp

uppupNLG Cp

TW

TPrV )(λ (2)

where:

9th International Conference on Probabilistic Methods Applied to Power SystemsKTH, Stockholm, Sweden – June 11-15, 2006

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pG is the remuneration of generator G in €/kWh (which may be different according to the technology used).

pp

G TW / is the average power generated by micro generator G in period p.

pGC∆ is the cost incurred by generator G on period p in order

to increase its generation when µG isolates.

Note that, in equation (2) we assume that all the produced energy is consumed inside the µG. The revenue VNLG is probably not very important, but, if special tariffs are arranged for the isolated mode of the µG, its effect will not be negligible. Those special tariffs may encourage some micro generators (the ones based on fuel consumption) to increase its generation when the µG isolates and an energy shortfall exists. This increase in generation implies a cost as mentioned on expression (2). If such tariffs are not in force, P=0 on expression (1).

Distribution operator benefits

To the distribution operator the establishment of µG may bring benefits related to the improvement of global reliability indices and reduction on penalties paid directly to the consumers when individual standards of quality of service are not met.

We could also include here the benefit resulting from loss reduction, but, since we are considering that the µG results from converting an existing LV network where micro generators and consumers preserve their modus operandi in normal operation, the contribution of µG to loss reduction is null. Of course, the situation would be different if decisions about new microgeneration were considered, but that is not the case, as stated before.

Concerning reliability, suppose an incentive mechanism which allows the distribution operator to be rewarded or penalized in accordance to the total non delivered energy (NDE) as shown on figure 2 (Portuguese legislation).

The values of NDEREF, ∆V, RQSMAX and RQSMIN are set by the regulator and the value of NDE is calculated from:

TIEPIT

EDNDE = (3)

where: ED is the annual energy (kWh) received by MV distribution network. TIEPI is the equivalent interruption time (h/yr) of the installed capacity in the MV network, calculated by:

∑

∑∑

=

= =

×= m

jj

n

i

m

jjij

IP

IPIDTIEPI

1

1 1 (4)

where: IDij is the duration of interruption i that affects the customer j. IPj is the installed power of consumer j.

The existence of µG can help the distribution operator avoid penalties or earn rewards since, after a MV interruption, some consumers are not interrupted and, as a consequence, the total value of NDE is reduced.

Figure 2 – Reliability incentive mechanism

Of course, the distribution operator will be more or less interested to see the development of µG according to its present situation relative to global NDE, but note that setting up more µG can always be a substitute for new investments in quality of service.

Another issue that may be defined in regulation is the penalties to be paid directly to customers when some reliability standards are not accomplished. Suppose the mechanism defined by equations (5) which establishes that a penalty must be paid to the customer if either the number or duration of interruptions along the year exceeds the reference values (as defined in Portugal). When both values are exceeded, the penalty is the largest value.

( )

CCrefID

refII

KPDDC

FCNNC

××−=

×−=

)( (5)

where: CI and CD are, respectively, the penalties due to exceeding the number and duration of interruptions; NI and DI are the values of the number and duration of interruptions along the year; Nref and Dref are the reference values of the number and duration of interruptions; FC are KC penalty factors; PC is the contracted power by the customer.

Since a µG can operate in isolated mode, the number of interruptions and its duration to at least a part of consumers inside it can be reduced. As a result, the total penalty value may also be reduced.

It is important to stress that these benefits achieved by the distribution company only occur if there is a significant number of individual standards violations, so its estimation is not straightforward. On the other hand, any benefit of this kind corresponds to a decrease on revenue for the consumers that were entitled to receive the compensation. This was not included in eq. (1) because it only applies to costumers that suffer from low quality of service, but a detailed analysis of specific cases must not ignore this aspect.

€

NDE

NDEREF

reward

penalty

NDEREF + ∆V

NDEREF - ∆V

RQSMAX

RQSMIN

€

NDE

NDEREF

reward

penalty

NDEREF + ∆V

NDEREF - ∆V

RQSMAX

RQSMIN

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IV. GLOBAL ECONOMIC ANALYSIS

The assessment of the benefits and costs resulting from the development of a µG must be made considering an expected life time of the project. As well, the costs and benefits that will result along this lifetime must be referred to the same moment using, for instance, the present value method. As a consequence, the global economic benefit for consumers (NPVC) and micro generators (NPVG) can be obtained from:

( )( )∑

= +=

n

tt

t

tANDEC d

VNPV

1 1 (6)

( )( )∑

= +=

n

tt

t

tNLGG d

VNPV

1 1 (7)

where n is the life time of the project and dt is discount rate. Concerning the distribution operator, the global benefit

can be obtained from:

( )( )∑

= +=

n

tt

t

tdisto d

ACNPVU

1 1 (8)

Where AC represents the annual benefits of the distribution operator resulting from: avoided penalties or earned rewards related to NDE; the avoided compensations paid to customers; and the value of deferred (or avoided) investments on distribution network related to maintaining the power quality standards.

As mentioned on section III, the establishment of a µG will imply investment, maintenance and operation costs. The actual value of global costs may be obtained by:

( )( )∑

= ++=

n

tt

t

tMoG d

CFNPVC

1

&0 1µ

(9)

where: F0 is the initial investment to create the µG CO&M is the annual value of maintenance and operation costs. dt is the discount rate n is the useful life of the µG

Some of the costs included in (9), which come from Table

I, can be easily allocated to generators and loads. Others, like the MGCC, are common and must be allocated according to some rule that takes into account the identified benefits. In this process, the distribution operator should of course also participate.

It is beyond the scope of this paper to design a complete scheme for cost allocation, but we believe that the economic analysis presented in sections III and IV constitute a good basis for the development of such a scheme.

V. UNCERTAINTY ISSUES Besides the inherent uncertainty associated to failures,

which is captured by the reliability evaluation models, most of the cost and benefit aspects mentioned before include uncertainty in data and parameters that must be taken into account by the decision model. Uncertainty affects investment, maintenance and operation costs incurred when establishing and operating a µG, but also the internal generation and load.

Because the concept of µG is quite new, statistical distributions about costs, values of generation of micro generators and loads inside the µG are not available. As a consequence, the decision maker should rely on estimations and expert’s knowledge.

We will address now the evaluation of the avoided non delivered energy when generation and load are uncertain, in order to show how uncertainty can be modelled in this kind of studies through the use of fuzzy sets [22][23]. Obviously, a similar strategy could be used regarding other uncertain data.

The approach is described through an example. Suppose a microgrid supplying three types of consumers with values for ANDE such that V1>V2>V3. The load shedding policy of the µG follows the NDE value hierarchy.

Assume now that, after an upstream network outage, the total power available inside the µG is represented by the trapezoidal number GP~ = (130, 170, 210, 250) kW, meaning that it may take any value between 130 and 250 kW, with a best estimate lying between 170 kW and 210 kW. The consumers’ loads are also represented by trapezoidal numbers as shown in Table 1.

TABLE 1

FUZZY LOAD OF CONSUMERS (KW) (60, 70, 80, 90)

(30, 40, 50, 60)

(100, 120, 140, 160)

1~P

2~P

3~P

On such circumstances, the total load of the µG,

340) 270, , 230 (190,P~C = kW, is greater than the total available power, so, if the µG isolates, some load must be shed. Checking first for type 1 consumers, we see their total load can be supplied, once the lower possible value of the available generation (130 kW) is greater than the maximum possible load (90 kW). So, the avoided NDE ( 1

~EDAN ) for

type 1 consumers coincides with their total load 1~P , multiplied

by the interruption time. The remaining available generation, 1

1 P~P~P~ GG −= = (40, 90, 140, 190) kW can be used to supply the next loads in the hierarchy (type 2 consumers). This is not always enough to satisfy all the possible values of the load, so the new NDE for type 2 consumers will be proportional to Max {0; (30, 40, 50, 60) – (40, 90, 140, 190)}, a non-trapezoidal number shown in figure 3.

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00.10.20.30.40.50.60.70.80.9

1

-10 -5 0 5 10 15 20 25 30kW

Poss

ibili

ty

Figure 3 – NDE to consumers of type 2 after isolation

The avoided NDE ( 2~EDAN ) will be the difference between

the original NDE that exists before the establishment of the µG (that coincides with 2P~ ) and the one presented on figure 3. However, since the two possibility distributions are not independent, the value of 2

~EDAN will not result from a direct arithmetic operation but rather from the careful application of the extension principle [22]. For that purpose, it is better to define the calculation as:

{ }1

222~~;0max~~

GPPPEDAN −−= Performing correctly this calculation leads to the

conclusion that, in this case, 22~~ PEDAN = . Therefore, some

situations that would come out in the direct arithmetic operation, like ANDE2=30-20=10 kW, are impossible, because P2 should take simultaneously two different values (30 kW without isolation and 60 kW after isolation).

The remaining available power to supply consumers of type 3 is { })P~P~(,MaxP~ GG 2

12 0 −= , leading to a NDE after isolation for consumers of type 3 of { })P~P~(,Max G

230 − , depicted in figure 4.

00.10.20.30.40.50.60.70.80.9

1

-20 0 20 40 60 80 100 120 140 160 180kW

Pos

sibi

lity

Figure 4 – NDE to consumers of type 3 after isolation

Again, the avoided NDE ( 3~EDAN ) must be calculated

using the extension principle and:

{ }2333

~~;0max~~GPPPEDAN −−=

The result is shown in figure 5.

00.10.20.30.40.50.60.70.80.9

1

-20 0 20 40 60 80 100 120 140 160 180

kW

Poss

ibili

ty

Figure 5 – ANDE to consumers of type 3

Now, the calculation of the total value of avoided NDE

( ANDEV~ ) for the consumers will lead to a fuzzy number given by:

)(~)(~

)(~~

3322

11

PVDENAPVDENA

PVDENAVANDE

−×+−×+

+−×= (10)

Therefore, we have propagated the uncertainty in load and

generation to get a fuzzy number that describes what may happen in terms of benefits due to increased reliability. This is essential to the decision making process and risk evaluation. Development of this topic is beyond the scope of this paper, but we still add that, concerning the global economic analysis of the benefits, a number of fuzzy NPV methods can be used [13][21].

VI. EXAMPLE The methodology presented in the paper was applied, for

illustration purposes, to a network adapted from the Study-Case LV Network of the Microgrids project [22]. We would like to stress that the purpose is really illustrating the application of the methodology and not drawing any conclusions about microgrid development, which would of course depend a lot of the specific circumstances of the project. On the other hand, data used in the example are merely indicative, namely regarding the investment costs.

This network, depicted on figure 6, supplies a total of 44 consumers, being 26 residential, 17 commercial and 1 industrial. The installed power of each category of consumers is, respectively, 204, 113 and 70 kW. Table III shows the values of average power of each kind of consumer into four different periods (A..D). Regarding micro generation, a 30 kW microturbine, a 30 kW fuel cell, a 15 kW wind turbine and a total of 13 kWp in PV systems were considered. Table IV shows the average power of each kind of micro generator.

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µT

30 kW

10 kW

30 kWFC 3 kW

~

Residential Load

Industrial Load

Commercial Load

PV

15 kW

µT microturbine wind turbine

FC fuel cell ~ storage system

20 kV

400 V

50 kW

Figure 6 – Test LV network

TABLE III AVERAGE POWER OF CONSUMERS INSIDE THE LV NETWORK (KW)

A B C DResidential 14.2 8.9 15.0 17.8Commercial 9.3 8.2 10.5 14.0Industrial 1.4 0.7 1.5 2.3

TABLE IV

AVERAGE POWER GENERATED INSIDE THE LV NETWORK (KW)

A B C DPV 1.4 1.8 1.4 0.8Microturbine 4.6 2.7 5.5 11.4Fuel Cell 4.6 2.7 5.5 11.4Wind turbine 2.7 2.3 3.0 4.6

The reliability data about upstream network are presented

in table V. TABLE V

RELIABILITY DATA OF UPSTREAM NETWORK A B C D

λup (f/yr) 0.8 0.4 0.8 1.6r (h) 4 4 4 8

The probability of unsuccessful isolation of the µG

considered was PM = 0.3 and the time needed to restore it after a complete shut down was Ta=0.25 h. The values of ANDE to the different consumers are presented on table VI.

TABLE VI

AVERAGE VALUES OF ANDE (€/KWH)

VResidential 1.50Commercial 35.00Industrial 20.00

The values of P and p

GC∆ used were respectively 1 € and 0 € (we assume that the micro turbine and the fuel cell never change their regimes of operation when the µG

isolates). The used tariffs for the payment of electricity generated on micro generators (subsidized) were: PV = Fuel cell = 0.3 €/kWh; and Wind turbine = Microturbine = 0.1 €/kWh. Considering an interest rate d = 6% and a life time of the project of 20 years, the NPV of benefits to consumers and micro generators are presented on tables VII and VIII.

TABLE VII

CAPITALIZED BENEFIT TO CONSUMERS (€/KW)

VANDE (€/kW)

Commercial 870Industrial 123Residential 5

TABLE VIII

CAPITALIZED BENEFIT TO GENERATORS (€/KW)

VNLG (€/kW)

PV 25Microturbine 76Fuel Cell 90Wind Turbine 67

As mentioned previously, the reliability related benefits

of distribution operator are more complex to be assessed, namely because they depend very much on the present situation of the distribution operator regarding figure 2. Therefore, we will not include them in the example.

Coming to costs, Table IX shows an estimation of the investment needs.

TABLE IX

INVESTMENT COSTS TO ESTABLISH THE MICRO GRID LV circuit-breaker 2,000 € Protection of MV Grid / µG interface 10,000 € Flywheel based storage system 12,500 € Load Controllers 13,200 € Micro generators Controllers 7,800 € MGCC 15,000 € Communication System 17,200 €

The project and construction costs were set to 20% of the

total investment. The annual operation and maintenance costs were considered equal to 1% of the investment costs. The NPV value of costs is, on those circumstances, equal to 102,152.13 €. The total benefits resulting to consumers and generators equal 114,239.40 €.

VII. CONCLUSIONS In this paper, we have shown how to evaluate the

economic benefits due to increased reliability when establishing a microgrid. In some cases, these benefits can be sufficient to compensate the investment costs, although there many other reasons (not addressed in the paper) that turn this new organization of LV networks very attractive, like cost reduction, deferral of investments in the distribution network, energy efficiency increase inherent to distributed generation and general security issues.

As it was apparent in the discussion, the regulatory framework is essential to the evaluation - incentives justified by the global social benefits should be envisaged

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by the governments and regulators, along with the definition of clear technical rules for the operation of microgrids.

Identification of costs and benefits is also the basis for a discussion about the way global costs could be divided among the different agents that benefit from the development of a microgrid. Such a discussion is the necessary next step of the process.

VIII. ACKNOWLEDGEMENTS The authors gratefully acknowledge the useful

information obtained from the Microgrid Project, funded by the European Commission under contract No. ENK5-CT-2002-00610.

IX. REFERENCES [1] Lopes J.A.P, “Management of MicroGrids”, International Electrical

Equipment Conference, Bilbao, October, 2003. [2] “System Integration of Additional Micro-generation”, Department of

Trade and Industry of UK, 2004, (available on-line on http://www.dti.gov.uk/renewables/)

[3] Caire, R.; Retiere, N.; Martino, S.; Andrieu, C.; Hadjsaid, N. “Impact assessment of LV distributed generation on MV distribution network” Power Engineering Society Summer Meeting, 2002 IEEE Volume 3, 2002

[4] Costa P.M., Matos M.A. “Reliability of Distribution Networks with Microgrids”, Proceedings of PowerTech 2005, St. Petersburg, June 2005.

[5] Abu-Sharkh S. et al, “Can microgrids make a major contribution to UK energy supply?”, Renewable & Sustainable Energy Reviews, Elsevier, www.elsevier.pt

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X. BIOGRAPHIES

P. Moisés Costa was born in 1975 in Viseu (Portugal). He received his Bachelor degree in Electrical Engineering (1996) at Superior School of Technology of Viseu, where he is presently assistant. At Faculty of Engineering of University of Porto he received the degree of licentiate (1998) and the M.Sc. (2002) in Electrical Engineering. He is presently studying for a Ph.D.

Manuel A. Matos (El. Eng., Ph.D., Aggregation) was born in 1955 in Porto (Portugal). He is presently Full Professor at the Faculty of Engineering of the University of Porto, Portugal, and Manager of the Power Systems Unit of INESC Porto. He also collaborates with the Management School of the University of Porto. His research interests include fuzzy modeling of power systems, optimization and decision-aid methods. He is a member of IEEE

9th International Conference on Probabilistic Methods Applied to Power SystemsKTH, Stockholm, Sweden – June 11-15, 2006

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