Allocation of Cost of Reliability to Various Customer Sectors in a Standalone Microgrid System

Sakthivelnathan Nallainathan, Ali Arefi (), Christopher Lund and Ali Mehrizi-Sani
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Sakthivelnathan Nallainathan: School of Engineering and Energy, Murdoch University, Perth, WA 6150, Australia
Ali Arefi: School of Engineering and Energy, Murdoch University, Perth, WA 6150, Australia
Christopher Lund: School of Engineering and Energy, Murdoch University, Perth, WA 6150, Australia
Ali Mehrizi-Sani: The Bradley Department of Electrical and Computer Engineering, Virginia Tech, Blacksburg, VA 24061, USA

Energies, 2025, vol. 18, issue 13, 1-23

Abstract: Due to the intermittent and uncertain nature of emerging renewable energy sources in the modern power grid, the level of dispatchable power sources has been reduced. The contemporary power system is attempting to address this by investing in energy storage within the context of standalone microgrids (SMGs), which can operate in an island mode and off-grid. While renewable-rich SMGs can facilitate a higher level of renewable energy penetration, they also have more reliability issues compared to conventional power systems due to the intermittency of renewables. When an SMG system needs to be upgraded for reliability improvement, the cost of that reliability improvement should be divided among diverse customer sectors. In this research, we present four distinct approaches along with comprehensive simulation outcomes to address the problem of allocating reliability costs. The central issue in this study revolves around determining whether all consumers should bear an equal share of the reliability improvement costs or if these expenses should be distributed among them differently. When an SMG system requires an upgrade to enhance its reliability, it becomes imperative to allocate the associated costs among various customer sectors as equitably as possible. In our investigation, we model an SMG through a simulation experiment, involving nine distinct customer sectors, and utilize their hourly demand profiles for an entire year. We explore how to distribute the total investment cost of reliability improvement to each customer sector using four distinct methods. The first two methods consider the annual and seasonal peak demands in each industry. The third approach involves an analysis of Loss of Load (LOL) events and determining the hourly load requirements for each sector during these events. In the fourth approach, we employ the Technique for Order of Preference by Similarity to the Ideal Solution (TOPSIS) technique. The annual peak demand approach resulted in the educational sector bearing the highest proportion of the reliability improvement cost, accounting for 21.90% of the total burden. Similarly, the seasonal peak demand approach identified the educational sector as the most significant contributor, though with a reduced share of 15.44%. The normalized average demand during Loss of Load (LOL) events also indicated the same sector as the highest contributor, with 12.34% of the total cost. Lastly, the TOPSIS-based approach assigned a 15.24% reliability cost burden to the educational sector. Although all four approaches consistently identify the educational sector as the most critical in terms of its impact on system reliability, they yield different cost allocations due to variations in the methodology and weighting of demand characteristics. The underlying reasons for these differences, along with the practical implications and applicability of each method, are comprehensively discussed in this research paper. Based on our case study findings, we conclude that the education sector, which contributes more to LOL events, should bear the highest amount of the Cost of Reliability Improvement (CRI), while the hotel and catering sector’s share should be the lowest percentage. This highlights the necessity for varying reliability improvement costs for different consumer sectors.

Keywords: renewable energy; standalone microgrid; cost of reliability; reliability improvement; Monte Carlo simulation (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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