This paper presents a method to determine optimal operating strategy for distributed generation (DG) incorporating reliability worth evaluation of a distribution system. The use of DG for peak shaving could reduce the overall system operating cost and its use as standby power could reduce the customer interruption cost. If the DG operating cost is less than the utility power cost at peak time, DG should be employed to reduce the overall system operating cost. However, when customer interruption cost is also an important concern, standby power strategy for DG may be better than peak shaving. The reliability worth and the power cost evaluations are needed to determine whether DG should be operated for peak shaving or as standby power. The hourly reliability worth is incorporated in the strategy proposed in this paper to determine the optimal operating decision for the DG. Using the approach proposed in this paper, the distribution companies could determine the optimal operating strategy for their DG.
