Distributed generation（DG） in a distribution network may bring about the sunk-cost owing to low utilization efficiency of the power supply equipments available that has escaped attention. The locational marginal capacity cost（LMCC） is introduced to reflect the forward-looking cost of nodal capacity and the degree to which nodal capacity is utilized while the approach to calculate the unit capacity cost of DG is given. Thus， the DG unit capacity cost lower than the LMCC at its candidate node is taken as the DG connection criterion. On this basis， a novel heuristic algorithm is proposed to determine the site and size of DG. The feasibility of the method proposed is verified by case studies.