One of the most contentious issues regarding the integration of nonutility generation (NUG) energy into the short-term planning of an electric utility is the evaluation of the buyback rate. The buyback rate as presented in this paper is based on the avoided operating cost. In this paper, a probabilistic technique has been illustrated that can be used to evaluate the appropriate avoided operating cost. This technique can be utilized to provide enhanced appreciation of the inclusion of NUG in short-term utility planning. It can be used by utilities as a basic framework upon which relevant power system operating criteria and cost parameters can be added.
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