Renewables and Storage in Distribution Systems: Centralized vs. Decentralized Integration

The problem of integrating renewables and storage into a distribution network is considered under two integration models: 1) a centralized model involving a retail utility that owns the integration as part of its portfolio of energy resources, and 2) a decentralized model in which each consumer individually owns and operates the integration and is capable of selling surplus electricity back to the retailer in a net-metering setting. The two integration models are analyzed using a Stackelberg game in which the utility is the leader in setting the retail price of electricity, and each consumer schedules its demand by maximizing individual consumer surplus. The solution of the Stackelberg game defines the Pareto front that characterizes fundamental tradeoffs between retail profit of the utility and consumer surplus. It is shown that, for both integration models, the centralized integration uniformly improves retail profit. As the level of integration increases, the proportion of benefits goes to the consumers increases. In contrast, the consumer-based decentralized integration improves consumer surplus at the expense of retail profit of the utility. For a profit regulated utility, the consumer-based integration may lead to smaller consumer surplus than that when no renewable or storage is integrated at either the consumer or the retailer end.