A methodology to Optimize Benefits of Microgrids

Mike Quashie, Student Member IEEE

Geza Joos, Fellow IEEE
Dept. Of Electrical and Electronic Engineering
Mcgill University,
Montreal, Canada
mike.quashie@mail.mcgill.ca,
geza.joos@mcgill.ca

Abstract—This paper proposes a generalized methodology to
determine the optimal configuration of microgrids that
maximizes its benefits. The technique proposed herein,
incorporates a probabilistic modeling of variable loads and
distributed generators into a deterministic power flow problem
to solve an optimization problem. The losses from the power
flow problem is monetized and supplied to the objective function
as one of its input multiple cost functions. The optimization
problem then concatenates the monetized losses, monetized
emission and the cost components of generation into a single
objective and then minimizes it. The optimization’s aim is to
minimize the energy cost to the utility while maximizing loss
reduction and emission reduction under all practical constraints.
The proposed algorithm is applied to a real feeder in North
America and the results showed a significant decrease in the cost
of energy. This demonstrates the effectiveness of the
methodology proposed in microgrid planning.
Index Terms— Benefits, Distributed Generation, Microgrid,
Monetized Losses, Optimization.
I. INTRODUCTION
Over the last few years, the traditional power system has
undergone tremendous changes. Government policies,
technological advancement, economic and environmental
incentives, seem to be changing the features of electricity
generation, transmission and distribution [1] while distributed
generation gradually increases its presence in the power
systems. Recent power outages during hurricane Katrina and
Sandy have exposed the vulnerability of a centralized power
system and highlighted the benefits of microgrids. Researchers
view microgrids as perhaps the epitome of the move toward
distributed power, where distributed energy resources (DER)
would coordinate to serve the needs of the local distribution
network and provide services to the main grid [2], [3]. The
term microgrid refers to a distribution system with distributed
energy resources that may operate connected to the main
power grid or in isolation (islanded mode) [4]. Microgrid is
seen as the technology that can improve local system
reliability and aid in the integration of renewable energy
resources. Alongside reliability, microgrids may provide
reduction in the cost of energy, investment deferral, reduction
in power losses and reduction in greenhouse gas emission.
These benefits may affect stakeholders within the power
system such as the utility, microgrid customers, independent
power producers, policy makers and society. Most of these
benefits are interrelated and an improvement in one may affect
another. However, there are benefits which may affect
particular stakeholders such as infrastructure investment
deferral, may benefit the utility or the distributed network
operator [5]. The cost associated with implementing the
infrastructures of microgrid is of great concern to stakeholders
hence the need to understand how to maximize the value
derived from its benefits. This would inform a better
investment decision in microgrid and enhance the drive
towards its advancement. Various studies appear in literatures
towards quantifying and optimizing some of these benefits.
Morris et al. developed a framework for quantifying these
benefits considering stakeholders participation. In [1] an
operational and planning methodology is also proposed to find
the minimum cost of energy using HOMER software [1]. The
use of HOMER, however, limits the flexibility of the
methodology proposed. Dicarto et al. also proposed an
optimization procedure for economic evaluation of microgrids
[6]. However this paper proposes a more flexible optimization
methodology which aims to maximize microgrids’ benefits. It
also includes more of microgrids’ benefits in its optimization
problem such as distribution losses which the US energy
information agency and energy statistics, Canada, estimates to
be 65.661 billion kilowatt hours for the year 2011 in Canada
and about the same figure for previous years [7].
Herein, the paper outlines a methodology to determine the
optimal configuration of microgrids to maximize its benefits.
The optimization problem concatenates the benefits as
multiple cost functions into a single objective function and
then minimizes it. The benefits considered include minimizing
distribution losses, reduction in generation cost and
greenhouse gas emission. Section II of the paper outlines the
modeling of the stochastic characteristics of the renewable
resources considered, Section III describes the formulation of
the optimization problem, Section IV details the

This work was sponsored in part by National Science and Engineering

Research Council (NSERC) of Canada through a grant to the NSERC Smart
Microgrid Network (NSMG-NET)

978-1-4799-1303-9/13/$31.00 ©2013 IEEE

implementation of the methodology on a real feeder and the HOURLY WIND POWER OUTPUT
results and analysis are presented in Section V. 0.1

II. MODELING OF RENEWABLE ENERGY RESOURCES

0.09

HOURLY OUTPUT IN PER UNIT (P. U)

A. Wind Energy
Uncertainties associated with renewable resources such as 0.08
wind and solar energy requires special consideration in power
system planning and analysis. Meteorological conditions such 0.07
as wind speed, solar irradiance, ambient temperature and the
like, highly influence the output of wind and solar energy.
0.06
Careful analyses have to be done to provide proper models
that reflect these characteristics. Herein, the weibull
distribution function is used to model the wind speed. The 0.05 Winter

weibull distribution has been advocated as the best model for Spring
Summer
wind speed [8]. Historical data of wind speed over a six year 0.04
Fall
0 5 10 15 20 25
period is obtained from Canadian weather energy and Hours
engineering datasets (CWEEDS). The data is utilized to
estimate an hourly frequency distribution of the wind speed Figure 1. Hourly Wind Power Output
for each season of the year, with each season represented by a
24hr daily distribution. The mean and standard deviation of B. Solar Energy Model
the data are computed as shown in (4) and (5) respectively. Unlike wind speed, the variability of solar irradiance is not
The weibull probability distribution function (pdfs) needed to totally random. Its value is certain to be zero at nights hence
model the hourly wind speed is then computed as a function of the use of weibull pdfs may not be appropriate in its modeling
the mean speed (xm) and standard deviation (σ) as shown in [9]. Herein, the Bimodal Beta pdfs model is used in describing
(1). The shape parameter (k) and scale parameter (c) are also the solar irradiance based on historical data as outlined in the
obtained as in (2) and (3) respectively. The output power (PW) sub section above. The mean and standard deviation of the
is computed as a function of the modeled hourly speed as in data is used to compute the parameters of the Beta distribution
(7). The rated power (Pr), cut in speed (xc), rated speed (xr) as shown in (8) and (9).
and cut out speed (xo), is provided on the manufacturer’s
specification. Fig. 1 shows the variable output of the wind ( )
= −1 (8)
generator.
( )
= (1 − ) −1 (9)
( )= ( ) (1)
Subsequently the probability distribution function is
=( ) .
(2) calculated as in (10) with ( ) as a gamma function. The
output power (Ps) is then calculated as a function of the solar
= (3) irradiance (s) and ambient temperature (T) as shown in (11).
( ) The maximum power output (Pmax), reference temperature
(Tref) and reference irradiance (Sref) is predetermined or
= ∑ (4) provided on the manufacturer’s specification. Fig. 2 also
. illustrates the output of the solar panel.
σ= ∑ ( − ) (5)
( )( )
( )= (10)
( ) ( )

Where n is the data size. When the value of k equals 2, = ∗ ∗ 1+ ( − ) (11)

f(x) becomes (6) as shown below and termed Raleigh
distribution.

( )= ( ) (6)

0, 0≤ ≤
P ∗ , < ≤
= (7)
P, < ≤
0, <
 HOURLY SOLAR OUTPUT A. Monetized Losses(ML)
0.06 Winter
Spring The power flow problem uses the forward and backward
Summer
Fall
iteration method to compute losses in the network. It takes the
0.05
variable output of the renewable resources and the variable
HOURLY OUTPUT IN PER UNIT (P.U)

load as input and computes the losses for various

0.04 configuration and sizing of the renewable resources for each
time period for each node (j) as in (15). The losses are then
0.03 monetized using wholesale price of energy (CP) as shown in
(16). It is worth noting that reduction in losses benefit the
distribution network operator as a stakeholder.
0.02
(, , , ) (, , , )
(t, n, µ, σ) = ∑ × (15)
(, , , )
0.01

ML (t, n, µ, σ) = (t, n, µ, σ) × CP (16)

0
0 5 10 15
HOURS
Figure 2. Hourly Solar output
The output of the renewable resources shows the need for
storage during the some hours of the day. The paper assumed
that the distributed resources may have enough storage and the
work herein does not elaborate on storage sizing, location and
scheduling. The load is assumed to follow the IEEE RTS
hourly distribution load curve.
III. OPTIMIZATION ALGORITHM FORMULATION
The technique proposed in this paper incorporates a
probabilistic modeling of variable loads (PLoad) and distributed
generators into a deterministic power flow problem to solve an
optimization problem. The losses (PLOSS) from the power flow
problem is monetized and supplied to the objective function as
one of its input multiple cost functions. The objective function
is formulated as a sum of the monetized losses (ML), cost
component of generation (GCC) and cost of emission of
greenhouse gases (GHC) as in (12). The objective function is
then minimized subject to energy balance, penetration limit
(Ppen), of the distributed resources, technical and reliability
constrains using the heuristic search method and cost benefit
analysis as in (13) and (14). The cost component of generation
herein refers to the cost of the grid’s power (PG) and that of
distributed generators (DG). In essence the objective function
represents the total cost of energy to the utility operator in this
instance.
20 25 B. Generation Cost Component(GCC)
The generation cost component as explained earlier is the
sum of the generation cost of electricity from the grid and that
of distributed generators (DGs) as in (17). Herein, the paper
assumes a flat rate for the cost of electricity from the grid,
since detailed computation of the operational cost of the
central grid is outside the scope of the paper. However, for the
DGs, the annualized cost of investing in the DGs is outlined in
(19) with the assumption that the operational cost associated
with the DGs is negligible. Annualized cost herein, refers to
the cost that needs to be recovered for a payback period of y
years, at an interest rate of r [10], [11]. Also, the capital costs
(CC) considered in the paper includes the cost of renewable
resources, its installation and other system component costs in
the microgrid. The salvage value (SV) is discounted to the
present value and subtracted from the capital cost. The
difference is then annualized using the capital recovery factor
(CRF) as outlined in (18) and (19) [11]. With the annualized
cost of energy computed, the average cost of energy (AVC)
from the DGs for wind (CPW) and solar (CPS) could be
obtained as in (20) and used in (18).
( , )=
∗ + , (t, n, µ, σ) ∗ +
, (t, n, µ, σ) ∗ (17)
( )
= (18)
( )
= ×( − ) (19)
($/ )
= (20)
( / )

min = (ML(t, n, µ, σ) + GCC(t, n) + GHC(t, n)) (12) C. Cost of Emissions(EC)

Mathematical models presented in this sub-section are
Subject to: used to monetize benefits associated with pollutant emissions,
which are the primary environmental benefit of microgrids
, − , (t, n, µ, σ) + , (t, n, µ, σ) + [12]. Benefits associated with environment are not specific to
, (t, n, µ, σ) = , (t, n) (13) utilities nor customers but the society as well. Herein, the
paper considers reduction in carbon dioxide (CO2) associated
,(t, n, µ, σ) + , (t, n, µ, σ) ≤ , × with use renewable resources compared to the use of fossil
, (t, n) (14) fuel. Carbon tax imposed on a ton CO2 emitted is used in
monetizing the emission associated with the central power
Where t is the time (hour of the day), n, p the number of generation to the grid as outlined in (21).
configuration, j is the bus (node) number while μ and σ
represents the estimated mean and standard deviation of the $
= × × (21)
variable characteristics of the renewable resources.
 IV. IMPLEMENTION OF ALGORITHM
The proposed algorithm is tested on International Council on
Large Energy system’s (Cigre’s) medium voltage North
American distribution network benchmark. This benchmark
is capable of operating as a microgrid with distributed
generators (DGs) and storage connected [12]. The
distribution network with no DGs and storage connected is
considered as the base case. The candidate nodes for DG
installation are nodes 4, 7 and 10. The historical
meteorological data of Varennes, Quebec is taken as input for
the renewable resources model. The peak load of the network
is given as 12.775MW [12]. The renewable resources
considered here are solar and wind with a maximum rating of
30KW and 1.5MW respectively. The cost of electricity
supplied by the grid is considered to be $0.04/KWh, Quebec
wholesale electricity cost [13]. That supplied by the Solar
Panel is obtained as $0.20/KWh while the wind turbine
supplies its energy at $0.13/KWh. A carbon tax of $10 per
ton of CO2 is considered in estimating the monetized
environmental benefit [14]. It is also assumed that the source
of the grid’s supply is diesel hence generates 778g of CO2
per KWh [15]. The network, with DGS connected operates as
a microgrid connected to the main grid at the point of
common coupling as shown in fig. 3. The DGs shown on the
figure represent candidate nodes for possible placement of
DG. The load is assumed to follow the IEEE RTS hourly
distribution load curve. The network load is considered to
increase by 10 percent annually.
Figure 3. Cigre's North American medium Voltage Distribution Network
Benchmark with DG connected to operate as Microgrid [12].
V. RESULTS AND ANALYSIS
The proposed algorithm is used in evaluating the cost of
energy for different positioning and sizing of DGs in the
above network. The algorithm uses the heuristic method to
determine the optimal configuration that results in the
minimum cost of energy as outlined in section III. Different
scenarios were considered in determining the optimal
configuration: (I) No DGs installed, (II) PV only installed,
(III) Wind only installed, and (IV) Both PV and Wind
installed. Though all scenarios showed some decrease in the
average peak cost of energy as compared to the base case, the
fourth option provided the most decrease. The optimal
configuration was also found to be 1.2 MW of wind turbine on
node 7 and 30 KW solar panel on node 4. A decrease of 16.1
percent is observed in the average cost of energy for the
optimal case in comparison to the base case as illustrated in
fig. 4. The monetized benefits accumulating from the loss
minimization and greenhouse gas reduction, offset the cost
associated with energy generation from the DGs and other
microgrid infrastructures, resulting in the lower energy cost
for the optimal case. The variable nature of the cost function is
due to the variability in demand and generational output
alongside the losses (PLOSS) component of the cost function.
The efficiency of the network is also improved by 10 percent
through loss minimization for the optimal case in comparison
to the base case. The other scenarios also resulted in some loss
minimization as illustrated in table 1. However, the
improvement in efficiency was very minimal for case II with
solar only. The output of solar panels during some hours of the
night is certain to be zero for some seasons so the network
then operates as in the base case resulting in the minimum
efficiency improvement. Scenario III on the other hand
showed significant improvement closer to that of the optimal
case.
COST OF ENERGY TO THE DISTRIBUTION SYSTEM OPERATOR
0.06
0.058
0.056
COST OF ENERGY(S/KWh)
0.054
0.052
0.05
0.048
0.046
0.044
0.042 Base Case
Optimal Case
0.04
0 10 20 30 40 50 60 70 80 90 100
WINTER SPRING SUMMER FALL
HOURS
Figure 4. Comparison of Hourly Total Cost of Energy to the Distributed
Network Operator for a Year (each 24hr represents a Season)
 TABLE I. LOSSES IN THE POWER NETWORK FOR VARIOUS
SCENARIOS
Average Losses(MWper hr)
Seasons Winter Spring Summer Fall Annual(MWh)
I. Base Case(No DG)
0.6757 0.6743 0.6770 0.6743 243.1123
II. Solar Only
0.6620 0.6605 0.6631 0.6605 238.1372
III. Wind Only
0.6037 0.5992 0.6160 0.6082 218.4336
IV. Wind and Solar
0.6035 0.5988 0.6155 0.6078 218.3088
VI. CONCLUSION
The proposed methodology has been developed and
applied to cigre’s medium voltage North American
distribution network benchmark, capable of operating as a
microgrid. Application of the methodology to the microgrid
planning process resulted in significant decrease in the cost of
energy to the distribution network operator. A significant
improvement in the network’s efficiency (loss minimization)
as well as reduction in CO2 emissions is also observed in
applying the methodology to the microgrid planning process.
The economic, technical and environmental benefits of the
microgid which are maximized through the use of the
proposed methodology help offset the cost associated with
microgrid’s implementation, building a better business case
for microgrid advancement. The methodology could be
extended to include storage sizing and scheduling in further
studies. This methodology is useful for long term planning
purposes of microgrids.
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