Future-Proof Tariff Design: Recovering Sunk Grid Costs in a World Where Consumers are Pushing Back

29 Pages Posted: 8 Apr 2017

See all articles by Tim Schittekatte

Tim Schittekatte

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Ilan Momber

Vlerick Business School

Leonardo Meeus

Vlerick Business School; European University Institute

Date Written: April 2017

Abstract

Traditional analysis of distribution grid user’s reaction to tariffs assumes a low price sensitivity and a lack of alternative technologies to grid connection. This is radically changing with two technology breakthroughs:

(1) Photovoltaics (PV) enable domestic and commercial consumers to self-produce energy;

(2) Batteries allow self-producers to set both their grid energy and capacity parameters.

Contributing to the state of the art, the grid cost recovery problem is modelled as a non-cooperative game between consumers. In this game, the availability and costs of new technologies (such as PV and batteries) strategically interact with tariff structures. Four states of the world for user’s access to new technologies are distinguished and three tariff structures are evaluated. The assessed distribution network tariff structures are: energy volumetric charges with net-metering, energy volumetric charges for both injection and withdrawal, and capacity-based charges. Results show that the new distribution world - open by new technology choices for grid users - is highly interactive and threatens grid regulation not understanding it.

Keywords: Batteries, bi-level modelling, distributed energy adoption, distribution network tariff design, non-cooperative behaviour

Suggested Citation

Schittekatte, Tim and Momber, Ilan and Meeus, Leonardo, Future-Proof Tariff Design: Recovering Sunk Grid Costs in a World Where Consumers are Pushing Back (April 2017). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2017/22, Available at SSRN: https://ssrn.com/abstract=2948369 or http://dx.doi.org/10.2139/ssrn.2948369

Tim Schittekatte (Contact Author)

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Ilan Momber

Vlerick Business School ( email )

Library
REEP 1
Gent, BE-9000
Belgium

Leonardo Meeus

Vlerick Business School ( email )

Library
REEP 1
Gent, BE-9000
Belgium

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

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