Equilibrium allocation strategy of distributed ESSs balancing ecology and economics in DNs considering carbon taxation systems

Zhaoqi Wang, Gang Lu, Jun Liu, Shengyu Wu and Cong Wu

Applied Energy, 2026, vol. 402, issue PB, No S0306261925017076

Abstract: With the goal of achieving carbon neutrality, distribution networks (DNs) play a critical role in integrating high proportions of renewable energy to replace fossil fuels. Distributed energy storage systems (ESSs) serve as an effective solution for storing and transferring low-carbon electricity within DNs, thereby maximizing the utilization of fluctuating low-carbon generation. However, the coupled nature of the objectives involved—which often differ in magnitude and dimension—makes it challenging to balance investments in distributed ESSs against the resulting carbon emission reductions. To avoid overinvestment in the siting and sizing of distributed ESSs, this paper proposes a comprehensive approach. First, carbon taxation systems within DNs are analyzed to clarify the distinctions between Pigouvian tax theory and tradable emission permit theory. Then, based on quantified ecological and economic indicators, an equilibrium allocation method for distributed ESSs is introduced using Nash bargaining. This method preserves the physical meanings and dimensions of each objective throughout the negotiation process. Finally, the proposed equilibrium allocation strategy of distributed ESSs is verified by simulation tests of a 33-node 10 kV DN, 129 million kg carbon emission was reduced with the budget of $ 150 million by configuring 5.41 MWh distributed ESSs.

Keywords: Distribution network; Distributed energy storage system; Ecology; Economics; Nash bargaining; Carbon taxation system (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1016/j.apenergy.2025.126977

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