The reliability assessment of future distribution networks is an important issue in power engineering for both utilities and customers. This is due to the increasing demand for more reliable service with less interruption frequency and duration. This research consists of two main parts related to the evaluation of the future distribution system reliability. An innovative algorithm named the encoded Markov cut set (EMCS) is proposed to evaluate the reliability of the networked power distribution system. The proposed algorithm is based on the identification of circuit minimal tie sets using the concept of Petri nets. Prime number encoding and unique prime factorization are then utilized to add more flexibility in communicating between the systems states, and to classify the states as tie sets, cut sets, or minimal cut sets. Different reduction and truncation techniques are proposed to reduce the size of the state space. The Markov model is used to compute the availability, mean time to failure, and failure frequency of the network. A well-known Test Bed is used to illustrate the analysis (the Roy Billinton test system (RBTS)), and different load and system reliability indices are calculated. The method shown is algorithmic and appears suitable for off-line comparison of alternative secondary distribution system designs on the basis of their reliability. The second part assesses the impact of the conventional and renewable distributed generation (DG) on the reliability of the future distribution system. This takes into account the variability of the power output of the renewable DG, such as wind and solar DGs, and the chronological nature of the load demand. The stochastic nature of the renewable resources and its influence on the reliability of the system are modeled and studied by computing the adequacy transition rate. Then, an integrated Markov model that incorporates the DG adequacy transition rate, DG mechanical failure, and starting and switching probability is proposed and utilized to give accurate results for the DG reliability impact. The main focus in this research is the conventional, solar, and wind DG units. However, the technique used appears to be applicable to any renewable energy source.