The Options Relations in DG Integrated Power System Classification and Pricing

The distributed generation (DG) acts an important role in the reliability of electric power system. In power market, with the rapid development of DG in recent years, it is necessary to discern and calculate the value of possible economic contract between the DG and the integrated main power grid, in which the DG and the main grid serve as reserve capacity for each other. The problem of possible options trading relations and relative pricing model as well as the calculation method of options value considering circumstances in primary electric power markets like China is mainly discussed in this article, together with an explanatory quantitative example. The important role of this trade relation in demand-side management (DSM) in power market is also discussed.