This paper presents a new formulation for the optimal planning of distribution systems considering both the implementation of distributed energy resources and the existence of electricity markets. The problem is to minimize the total cost while subject to the system constraints. The costs incurred during the planning time such as capital cost, replacement cost, and fuel cost, etc. are reverted to the initial stage by the rate of return and summed up to form the objective function, called Net Present Cost. The problem is formulated in Dynamic Programming framework and solved by Dynamic Programming backward algorithm. The numerical simulation in case study shows that the proposed method is capable of providing a flexible planning scheme, i.e., optimal policy while handling all system requirements throughout the project lifetime. In addition, the drawback of Dynamic Programming such as computation time is acceptable in the planning problems.

optimal planning, distributed energy resources, electricity markets, dynamic programming, backward algorithm