Abstract
The growing complexity of modern distribution networks — driven by increased electrification, distributed energy resources, and aging infrastructure — demands advanced operational planning tools for Distribution System Operators (DSOs). This paper proposes a comprehensive methodology for quantifying the full spectrum of DSO operational costs, enabling consistent evaluation of both internal and external flexibility options. The framework incorporates key cost components, including power losses, network reconfiguration, procurement of flexibility services, reactive power compensation, operational costs of DSO-managed Battery Energy Storage Systems (BESSs), increased degradation due to overloading, and the expected costs of energy not supplied (CENS). A key contribution is the inclusion of true utilization costs for DSO-owned equipment, such as on-load tap changers (OLTCs), reconfiguration switches, and batteries, by including a portion of their capital investment based on lifetime impact. This approach enables controlled overloading of components and promotes economically rational operational strategies. The methodology also introduces a structured categorization of operational costs and defines relevant operational objectives. Illustrative case studies demonstrate the applicability and effectiveness of the proposed framework, offering DSOs a practical tool for minimizing total operational expenditures while enhancing network reliability and flexibility.