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Title: Capacity-Based Residential Grid Tariffs in the Context of Photovoltaic Generation and Battery Storage
Other Titles: Capaciteit gebaseerde residentiele net-tarieven in het kader van fotovoltaische generatie en batterij opslag
Authors: Jargstorf, Johannes; R0267578
Issue Date: 13-Apr-2016
Abstract: The electricity grid is needed to transport electrical energy from where it is produced to where it is consumed. Mostly this means central generation and local consumption, but increasingly also local generation uses the grid. Grid tariffs are charged to the grid users to fund the grid in a sustainable way. These grid tariffs shall generate sufficient revenue but they shall also fulfill further objectives: reflectivity and equity or “fairness”. Reflectivity means that the fee for a user reflects the costs the user caused to society. This shall lead to an efficient grid operation and to optimal grid capacity. Equity is less tangible, and can mean that every user should make an appropriate contribution to covering of the grid costs. For residential users under the traditional operation with central generation and local consumption, rather simple tariffs are designed, which are sufficiently reflective and “fair”. Examples are the purely volumetric tariffs which are applied, for instance, in Belgium or Germany.
For a number of years, this operation is transformed: Rising levels of local generation can be observed in many countries, a trend towards self-generation by “prosumers”, users than consume and generate electricity, emerged and new consumers such as electric vehicles are predicted to spread. This leads to a number of challenges for the existing tariffs. Self-generation by some users, for instance, leads to a drop in revenues for the grid operator, which has to be covered by the other users. Existing tariffs also provide insufficient economic signals reflecting for instance the costs related to injection. The existing tariffs have to be reviewed, thus, and might have to be adapted.
In this work, the aspect of adding a capacity component to a grid tariff for residential grid users, is in the focus. This means that there is a tariff on the instantaneous energy exchange with the grid, not only on the cumulated exchange. Such a tariff is assumed having the advantage of being less sensitive to a reduction of the energy off-take and of providing a stronger economic signal. Accordingly, capacity-based tariffs are currently considered in several countries as an option to address looming challenges from local generation or loads as electric vehicles. Capacity-based tariffs also exist already on other grid levels and in some countries.

A major problem is the almost entire lack of research conducted on capacity-based tariffs so far. There is, for instance, basically no research on the question which share of revenue should be raised through a capacity component and which through an energy component. Answering this question from the point of view of a regulator is in the focus of this work. An answer has to be based on economic and equity objectives. Yet, there is also number of regulatory and technical aspects constraining the fulfillment of the objectives. In this work, at first, relevant aspects of tariff design are presented, including economic models but also regulatory and technical constraints. This outlines especially the difficulties in applying economic principles. Based on that, different approaches to set the tariff components are discussed. Due to the noted difficulties, a focus is seen here on equity. A proposal to a more formalized approach to equity is presented taking into account the assumed relevance. Furthermore, a tool to assess the impact of a user reaction on the tariff objectives is developed. This reaction affects economic objectives but also equity. This outcome after a reaction has to be taken into account for the assessment of a tariff. Based on the tools, a number of recommendations is derived. Finally, the aspect of demand response is integrated into the grid tariff.
Publication status: published
KU Leuven publication type: TH
Appears in Collections:ESAT - ELECTA, Electrical Energy Computer Architectures

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