Renewable in distribution networks: Centralized vs. decentralized integration

The problem of integrating renewable generation in a distribution network is considered under two integration models: a centralized utility-based model in which the utility owns and operates the renewable generation as part of its portfolio of energy resources, and a decentralized consumer-based model in which each consumer owns and operates the renewable generation and is allowed to sell surplus electricity back to the utility in a net-metering setting. Interactions between the utility and its consumers are captured by the retail price of electricity set by the utility. Under the day ahead hourly pricing scheme, the Pareto frontier of the tradeoff between consumer surplus and retail profit is characterized under the two models. It is shown that, depending on the level of regulated utility profit, the consumer-based decentralized integration may lead to lower consumer surplus than that when no renewable is integrated. On the other hand, the utility based centralized integration always improve consumer surplus.