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Technical and economical assessment of distributed generation (DG) installation in power systems is one of the main stages in related studies. Because some capabilities of sub-transmission substations such as presence of operators and existing monitoring and control facilities, they are suitable candidate for DGs installation. This paper presents a new method for economical evaluation of DG installation in a sub-transmission substation. In this approach all cost items (including investment, operation, and maintenance costs of DG) and benefit items (including substation capacity upgrade deferral, reduction in annual cost of purchased active/reactive power and reliability improvement) are mathematically modeled. Then, these items are aggregated as an objective function. Also operational constraints of DG are considered in the formulation. The effectiveness of the proposed approach is evaluated by some numerical studies and sensitivity analysis.