Effective DG Incentive and DSR Incentive for Distribution Network Operators

  • Mohammad Hidayat

Student thesis: Doctoral ThesisPhD


Countries around the world set ambitious targets to substantially reduce their greenhouse gasses emissions, including those which come from electricity sector. This requires a transition to a low carbon electricity generation and supply system, which in part, can be met by increasing distributed generation (DG) connection and implementing demand side response (DSR) programme on distribution network. Therefore, the role of distribution network operators (DNOs) in facilitating the connection of new DG and the implementation of DSR programme is vital. In order to encourage DNOs to be more active in the low carbon transition, the energy regulator needs to set up financial incentives for DNOs. Current DG incentive mechanism, which is applied in the UK, aims to incentivise DNOs based on the amount of DG capacity connected to the network. Consequently, in a generation-dominated area, the incentives might not be sufficient to cover the reinforcement required for connecting DGs, which in turn, the output energy from DGs will be excessively curtailed. Therefore, this research proposes a new approach, called energy-based DG incentive mechanism. This mechanism will incentivise DNOs based on the utilization of available DG energy on the network and its relation with the requirement of network reinforcement. In terms of DSR incentives, different mechanisms have been applied in some countries, including Australia and USA. Some of the mechanisms incentivise DNOs based on the investment cost or forgone revenue related to DSR initiatives, as implemented in demand management incentive and rate of return mechanisms. Other mechanisms aim to incentivise DNOs based on the energy savings or avoided costs of supply associated with DSR participation, as implemented in shared savings and avoided cost mechanisms. Those mechanisms operate independently without any correlation between them. Therefore, this research develops a new approach to assess the relation between DSR investment cost and DSR participation, called energy-based DSR incentive mechanism. This mechanism will incentivise DNOs based on the utilization of available DSR energy on the network and its relation with the required investment. Comparing with current incentive mechanisms, both energy-based DG incentive and energy-based DSR incentive can reflect the effectiveness of DNOs to deal with the required investments in association with DG connection and DSR implementation on their network.
Date of Award21 May 2015
Original languageEnglish
Awarding Institution
  • University of Bath
SupervisorFurong Li (Supervisor) & Martin Balchin (Supervisor)


  • DG Incentive
  • DSR Incentive
  • Distribution Network Operators
  • DG connection
  • DSR implementation

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