Abstract
Most current regulations allow small-scale electric generation facilities to participate in distributed generation (DG) with few requirements on power-purchase agreements. However, in this paper, it is shown that distribution companies can alternatively encourage DG investors into DG contracts that can significantly benefit the utility network. In this regard, a new algorithm is proposed to determine the best sites, sizes, and optimal payment incentives under such special contracts for committed-type DG projects to offset distribution network investment costs. On one hand, the aim is to allocate DGs such that the present value profit gained by the distribution company is maximized via procuring power from DGs and the market at a minimum expense. On the other hand, each DG unit's individual profit is taken into account to assure that private DG investment remains economical. The algorithm is verified in various cases and the impacts of different factors are accordingly studied.