Pricing and Control in the Next Generation Power Distribution System

Smart grid technologies are gaining acceptance and are being integrated into power distribution systems as a result of public and private investment and funding. However, costs of these technologies appear to be a clear obstacle in the widespread integration and maximal use of these technologies. In this paper, the utilization of dollar pricing signals is proposed and illustrated for power distribution engineering. A signal modeled after locational marginal pricing from transmission engineering is proposed to provide pricing data locally in distribution systems. The calculation, utilization, advantages, and shortcomings of the concept are presented. A main conclusion is that the use of a distribution locational marginal price signal fits well with an electronically controlled power distribution system.