Distributed generation and distribution pricing: Why do we need new tariff design methodologies?

• Systematic review of the different challenges posed by an increasing amount of distributed generation within the distribution tariff design.
• Review of different distribution tariff options for distributed generation in different countries.
• Review of the most relevant methodologies proposed in the literature to include distributed generation into the tariff design.
• Recommendations on how to address the open issues with respect to tariff design and distributed generation.

Due to the increasing amount of DG (distributed generation) in distribution grids, new challenges are arising in the distribution sector in many countries. Depending on the DG penetration, location, concentration, size and generation technology, the DG impact on network costs can be either negative or positive. These additional costs or benefits can be allocated to the DG owners through network tariffs. New cost allocation methodologies, based on a cost causation principle, are therefore required.This paper addresses several issues arising within network tariff design due to the integration of DG. Furthermore, it reviews the methodologies proposed so far to tackle those issues. Recommendations for setting up a new, cost causation-based, methodology are finally drawn.