LBNL Report Number
We take the perspective of a microgrid that has installed distribution energy resources (DER) in the form of distributed generation with combined heat and power applications. Given uncertain electricity and fuel prices, the microgrid minimizes its expected annual energy bill for various capacity sizes. In almost all cases, there is an economic and environmental advantage to using DER in conjunction with demand response (DR): the expected annualized energy bill is reduced by 9% while CO2 emissions decline by 25%. Furthermore, the microgrid's risk is diminished as DER may be deployed depending on prevailing market conditions and local demand. In order to test a policy measure that would place a weight on CO2 emissions, we use a multi-criteria objective function that minimizes a weighted average of expected costs and emissions. We find that greater emphasis on CO2 emissions has a beneficial environmental impact only if DR is available and enough reserve generation capacity exists. Finally, greater uncertainty results in higher expected costs and risk exposure, the effects of which may be mitigated by selecting a larger capacity.