Siting and Sizing of Distributed Generation for
Optimal Microgrid Architecture
Mallikarjuna R. Vallem, Student Member IEEE, Joydeep Mitra, Senior Member IEEE
Electric Utility Management Program
The Klipsch School of Electrical and Computer Engineering
New Mexico State University
Las Cruces, NM 88003
Abstract- This paper presents a method for optimally
siting and sizing distributed generation (DG) units in a
microgrid. The optimization is based on stipulated
reliability criteria. Power system planning based on
reliability gives rise to efficient architectures which can
meet the consumer requirements with minimum system
upgrade. This paper develops a technique for determining
the optimal location and sizes of DG units in a microgrid,
given the network configuration and the heat and power
requirements at various load points. The method is based
on simulated annealing. Thermal output and utilization of
Combined Heat and Power (CHP) units are considered.
The paper presents the development and implementation
of the method, and demonstrates its application on a six
bus test system.
Index Terms- microgrid, distributed generation (DG),
simulated annealing, siting and sizing, reliability.
I. INTRODUCTION
Distributed generation (DG) is proving to be a viable
alternative to conventional generation systems [1]. With
new technologies like microturbines, fuel cells, wind
generators, solar cells, etc, getting cheaper their deployment
into the grid will increase. Combined heat and power
generation (CHP) is one of the benefits of several DG
technologies [2]. Adding new components to a system should
comply with better reliability and minimum costs. US
Department of Energy has published a vision to make DGs
practical by 2020. Moreover there are several benefits from
DGs both in terms of environmental and economic
considerations [3].
Microgrids are small DG based interconnected systems
which will be easy to design, operate and sustain. Our vision
of microgrid is that they not only network DGs with load
points, but should also have the ability to operate in both grid-
connected and islanded modes. Microgrid architecture
includes planning issues such as optimally designing the
interconnections, sizing and siting the DG units to maximize
reliability, reduce costs and improve security of the system.
System planning based on reliability makes the system
more robust and complies with the requirements of the
consumers. System outage costs have been estimated which
prove that an increase in system cost should be a compromise
between the affordable price and the achieved reliability.
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Moreover planning the systems based on reliability gives us a
view of the weaker portions of the system which could be
taken care of in further upgrade whenever possible thus
leading to long term planning.
Deployment of DG differs from the conventional
generation. Based on the type of DG, system planning can
vary to maximize the benefits from the options available. For
example, solar panels become more viable in places where
there is more insolation. Microturbines and fuel cells have
CHP which could be used at places where more heat is
required. Ocean thermal energy conversion may be more
feasible for tropical countries having long coastlines. In view
of these limitations it becomes extremely important to build an
optimal strategy for deploying such units within a microgrid.
As we are dealing with a microgrid, we assume the
operational cost of all the DERs is constant with respect to
their operation anywhere in the microgrid.
In this paper we have developed a model to address the
siting and sizing problem of the optimal microgrid
architecture. In a prior research effort an optimization method
was implemented to determine the DG siting using the
simulated annealing technique [4]. In this paper we extend the
technique to solve the siting and sizing of DG simultaneously.
The problem of siting and sizing of DGs has been
addressed in various references cited. Ref. [5] describes a
successive elimination algorithm to site and size the DGs. Ref.
[6] describes a new heuristic approach based on cost benefit
analysis to optimally detennine the capacity and location of
the DG from the prospect of a distribution company. Ref. [7]
has used a Mixed Integer Programming (MIP) formulation,
with branch and bound optimization for an industrial power
plant. Ref. [8] deals with a genetic algorithm optimization for
deploying a DG resource in a distribution system. Ref [9]
proposes a framework for embedded generation planning in
line with special emphasis on risk and uncertainities. Ref. [10]
computes capacity based on risk factor and addresses about
the reliability issues which arise as a consequence of
transmission bottle-necks. In this paper we present a technique
to design the location and capacity of DG into an existing
microgrid to achieve certain reliability with minimal
additional cost. The cost function has been modeled as a
Nonlinear Programming problem and Simulated Annealing
(SA) optimization has been used to achieve global optimum.
 II. PROBLEM FORMULATION where
Planning of a microgrid to optimally site and size the DG is H = NB vector of heat demand at the nodes.
achieved by formulating the model as an optimization UH = heat output of a unit of DG.
problem. The objective function is the total system cost per and the superscript '+' denotes the following operations.
year which includes costs like deployment costs and heat The ith element of the vector CH is,
compensation costs. The heat compensation cost takes into a+=a if a>O
consideration the extra cost of the system which has to be a+O if a<O
spent to supply the excess heat demand which could not be For simplicity we take the units for heat as power units. The
supplied by the heat output of the DGs. The network additional costs for the heat compensation will be
constraints and the stipulated reliability criteria make the Jpowver X UN X CH (3)
problem a non-linear mixed integer optimization which is
solved by simulated annealing. where
Consider a system with NB nodes, NG generators, and NT UN = unit vector of dimension NB.
transmission lines. The system load might increase and Jpower = cost of gas to produce a unit of heat.
additional capacity needs to be installed to achieve certain Mathematically the problem can be expressed as follows.
reliability. We consider installing DG into this system which Minimize
could be deployed at different nodes. JX F + J 70u1el0 (4)
Cost = r xT xUN CH
Further the energy demand is divided into heat demand and
electrical demand. Then it is possible to model the use of CHP Subject to:
from the DGs. In practice, separating heat demand and EIR > RO (i)
electrical demand in a system is not that easy, there is a C=O (ii)
responsibility and necessity of estimating them to achieve where
better efficiency of the system. EIR = Energy Index of Reliability [1 1]
A unit resource is defined as a DG which has a unit power RO = minimum reliability desired
and heat capacity. These units of power and heat can be C = NB vector of bus power curtailments.
specified depending on those commercially available or Constraint (i) specifies the minimum reliability the system
feasible. is required to meet. Constraint (ii) eliminates solutions which
The costs arising from the strategy of deployment are may never be able to meet the complete demand of the system.
modeled and a cost optimization is done. The total cost C. Reliability Evaluation
involved can be classified as deployment costs and heat
compensation costs which will be detailed below. To obtain the energy index of reliability, a DC load flow is
solved to minimize the curtailment [12]. The DC load flow
A. Deployment Cost model is as follows.
An NB vector of deployment cost 'J' is developed such that
its ith element is the cost of deploying a unit of DG at the ith Loss of Load = Min. Ci
node. The solution space 'F' is the selection of the number of
units of DG at every node which will be an integer vector of subject to:
size NB. A linear depreciation is assumed where annual BO + G + C = D
depreciation rate will be r. Then the cost for deploying the G .G max
resource in our system is, C. D (5)
rX JTXF (1) bAO < Fm ax
where 0 unrestricted
r = rate of depreciation per year where,
F= NB dimensional solution vector where the ith element is D = NB vector of bus load
number of units of DGs at node i. Gmax = NB vector of available generation at buses
J = NB vector of deployment costs. Fmax = NT vector of flow capacities of transmission lines
B. Heat Compensation Cost b = NT x NT primitive (diagonal) matrix of
transmission line susceptances.
If the heat demand at any node is not supplied by the CHP
at that node, excess heat demand is compensated by gas A = NT X NB element-node incidence matrix.
heating. So there is an excess cost for gas required to supply B = NB x NB augmented node susceptance matrix.
the additional heat demand which is proportional to the heat = ATbA
curtailment. The heat curtailment is given by a vector CH Of 0 = NB vector of bus voltage angles.
dimension NB, EIR is calculated by
CH = (H -FXUH) (2)

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 where a < 1 and it is better to choose an 'a' around 0.9[13].
EPNS = X, LOL i x prob .
The neighborhood for the next iteration is changed so that half
i=l
the numbers of previous solutions are accepted. Then the
EIR 1- EPNS (6) cooling schedule is followed till we reach a final temperature
D Tot or a temperature where we have consistent minimum in the
where last few temperatures.
EPNS = expected power not served.
DTo, = total power demand.
NC = number of contingencies.
III. SIMULATED ANNEALING OPTIMIZATION
The optimization is a nonlinear programming type and this
section demonstrates how simulated annealing technique is
applied to solve the problem.
A. Simulated Annealing
Simulated Annealing is a stochastic global optimization
technique which has an asymptotic convergence to the global
minima [13]. The concept is based on the manner in which
liquids freeze or metals recrystalize in the process of
annealing. In an annealing process a melt, initially at high
temperature and disordered, is slowly cooled so that the
system at any time is approximately in thermodynamic
equilibrium. This method can. get over the local minima as we
not only consider downhill moves but also uphill moves with
a probability based on the temperature 'I' using the
metropolis criteria [14]. At higher temperatures a lot of uphill
moves will be accepted but their acceptance reduces with the
temperature decrease and the search asymptotically converges
to the global minima. A proper choice of neighborhood and
cooling schedule will give near optimal solution in a
reasonable time.
B. Algorithm
The Simulated Annealing algorithm is as shown in
Fig. 1. Simulated annealing starts at a high temperature with
an initial feasible solution. Initially the neighborhood is
assumed to be the entire solution space. The temperature is
then decreased following a cooling schedule. At every
temperature a fixed number of solutions are visited. For each
solution the new objective value is compared to the current
one. If the new solution has objective value lesser than the
current one, it is directly accepted. But if the new objective
value is greater than the current one, it is accepted with an
acceptance probability given by,

AT (i, i ) = exp (- Q" -f() (7)

This is how it is able to escape from local minima. At
higher temperatures a lot of uphill solutions are accepted, but
as the temperature is reduced, the uphill moves get reduced.
After N iterations at a temperature, the temperature is reduced
using a geometric cooling schedule.
Tnew = a x Told (8)
Fig. 1. Simulated Annealing Algorithm.
In our optimization the solution is an integer vector of
dimension NB. The solution space is an integer space with
limits zero and the total deficit capacity in the system. The
solution space might have a lot of local minima but only one
global minimum. In the search, if only downhill moves are
allowed, the search will get trapped into a local minima. So
the initial acceptance probability of uphill moves should be
reasonably high. Temperature significantly varies the

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acceptance probability. So the temperature is chosen high. It B. Selection and initialization ofparameters
should be much greater than the objective function at the The reliability indices for the generators and DG units are
initial solution and the cooling process reduces the taken to be the same. Mean time to failure (MTTF) and mean
temperature. Another important factor is the neighborhood. time to repair (MTTR) are taken as 2940 and 60 hours
Every time we sample a random solution in the current correspondingly [16]. The average outage duration for the
neighborhood. Initially the neighborhood is very large which transmission lines is 35 hours.
is taken as the entire solution space and with every cooling
TABLE L. LINE DATA
schedule, we reduce the neighborhood depending on the
current global solution. In a way we are moving among From To Z (p.u) Susceptance
solutions 'closer to the current global solution which finally (p.u)
gets concentrated around the global minimum. The algorithm 122 0.2238 +j 0.5090 1.646
is terminated when the temperature reaches a minimum value. 2 3 0.2238 +j 0.5090 1.646
3 4 0.2238 +j 0.5090 1.646
C. Implementation 4 5 0.2238 +j 0.5090 1.646
The simulated annealing needs proper choice of 5 6 0.2238 +jO0.5090 1.646
neighborhood, initial temperature, a and operational 1 6 0.2276 +j 0.2961 2.123
parameters like change of neighborhood in successive cooling. 1 1 5 0.2603 +j 0.7382 1.205
The initial neighborhood is the entire solution space. TABLE II. GENERATOR DATA
Successively, after every cooling schedule, the neighborhood
of the solution at one of the node is changed by reducing the Generator Capacity Location
neighborhood by one unit. 1 10 Node 1
The initial solution accelerates the optimization process. 2 8 Node 1
To start with, a capacity increase proportional to the load 3 5 Node 5
growth is assumed and is equally divided among all the nodes. 4 5 Node 5
'a' is taken as 0.9. The initial temperature should be TABLE III. LOAD DATA
taken as some value large enough to accept a large number of Bus Electrical Load (MW) Heat Load
solutions. So it is assumed here as million times the cost of the (x 106 BTU/hr.)
initial solution. At lower temperatures the search becomes a 1 0 0
local search which will be sufficient when we are near global 2 4 6.824
solution.
3 7.5 10.236
IV. TEST SYSTEM AND RESULTS 4 5.5 6.824
5 0 0
A. System Description 6 5 8.53
The optimization strategy was applied on a 6 bus test
system [15]. Four generators are available, two each at nodes The deployment cost is assumed at an average of 600$/kW.
1 and 5 which can supply a maximum power of 28 MW. The cost of gas heating is assumed at 10.75 $/106 BTU. A unit
Nodes 2, 3, 4 and 6 are load buses with a total electrical of DG is assumed to have a capacity of 0.1 MW electrical and
demand of 21 MW. Also the load is separated into electrical 0.1706x106 BTU/hr heat. The deployment cost for a unit DG
and heating loads. The system data is tabulated below. at each of he nodes is tabulated below.
TABLE IV. DEPLOYMENT COST OF UNIT DG (IN $ MILLION)
Nod 1 2 3 4 5 6
e
Cost 0.05 0.06 0.07 0.08 0.04 0.06
The solution determines the number of units of DG to be
placed at each node. Whatever may be the solution the entire
DG capacity at that node is assumed to be one component for
computing EIR. The cooling process starts with temperature
of 1.6637e+01 1 and final temperature 1.7, and the
neighborhood is changed after every 5 cooling routines.
Convergence was achieved when any of the three conditions
was satisfied.
Fig. 2. Six Bus Test System. Condition 1: Current global solution remains unchanged for
10 consecutive cooling routines.
Condition 2: The neighborhood is small enough to have a

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near optimal solution.
Condition 3: The final temperature is reached.
C. Results
The simulated annealing approach explained above is
applied to the test system. Out of the possible 5.314e+011
solutions, the optimization converged in a near optimal
solution after sampling just 4700 solutions. The cost of the
optimal deployment plan is $0.88 million per year excluding
the running power costs. The optimal solution has an EIR of
0.9703. The optimal solution for the capacity of DG to be
deployed is tabulated below.
TABLE V. OPTIMAL NUMBER OF UNITS OF DG TO BE DEPLOYED
Node 1 2 3 4 5 6
No. of units 0 20 40 30 0 40
It is a valid observation that nodes 1 and 5 are not load
points. So the optimization has rightly shown no DG
installation at that point. Though the solution space was quite
large the optimization arrived at the global optimum very
quickly. The ratio of the solutions sampled to that of the entire
space will decrease with increase in system size which saves a
lot of computational time for larger systems. The simulated
annealing optimization promises an asymptotic reachability of
the global optimal with a probability 1.0 [13].
V. CONCLUSION
This paper presented a simple yet efficient technique to
estimate the capacity and location of DG required to achieve a
desired reliability in a microgrid with optimal cost. The
simulated annealing technique proves to be highly practical in
view of application to large systems which could be otherwise
computationally intensive. The heat compensation cost plays a
significant role in the optimization performed. At the same
time as DGs become more commercial, utilities need to
estimate the heat loads of various consumers to better use the
benefits of CHP.
Though simulated annealing is a heuristic technique, a
global optimum could be assured by the proper selection of
parameters. Research is being done to analyze the role of each
parameter on the optimality of the solution. Further research is
being done to differentiate the types of DGs, so that we can
determine the right choice of the mix of DGs to be deployed
in a microgrid. The results will be reported in due course.
ACKNOWLEDGMENTS
The work reported in this paper was supported in part by
the National Science Foundation, under grants ECS-0134598
and ECS-0140092, and by the Electric Utility Management
Program. This support is gratefully acknowledged.
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