Spillover Effects of Distribution Grid Tariffs in the Internal Electricity Market: An Argument for Harmonization?

38 Pages Posted: 31 Jan 2019

See all articles by Niels Govaerts

Niels Govaerts

VITO - EnergyVille

Kenneth Bruninx

KU Leuven

H. Le Cadre

CEA-LIST

Leonardo Meeus

Vlerick Business School; European University Institute

Erik Delarue

KU Leuven

Date Written: January 2019

Abstract

In many countries, distribution grid tariffs are being reformed to adapt to the new realities of an electricity system with distributed energy resources. In Europe, legislative proposals have been made to harmonize these reforms across country borders. Many stakeholders have argued that distribution tariffs are a local affair, while the EU institutions argued that there can be spillovers to other countries, which could justify a more harmonized approach. In this paper, we quantify these spillovers with a simplified numerical example to give an order of magnitude. We look at different scenarios, and find that the spillovers can be both negative and positive. We also illustrate that the relative size of the countries is an important driver for the significance of the effects. To be able to quantify these effects, we developed a long-run market equilibrium model that captures the wholesale market effects of distribution grid tariffs. The problem is formulated as a non-cooperative game involving consumers, generating companies and distribution system operators in a stylized electricity market.

Keywords: Distribution grid tariff design, Distributed energy resources, Non-cooperative game, Mixed complementarity problem, Spillovers

Suggested Citation

Govaerts, Niels and Bruninx, Kenneth and Le Cadre, H. and Meeus, Leonardo and Delarue, Erik, Spillover Effects of Distribution Grid Tariffs in the Internal Electricity Market: An Argument for Harmonization? (January 2019). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2019/02, Available at SSRN: https://ssrn.com/abstract=3324988 or http://dx.doi.org/10.2139/ssrn.3324988

Niels Govaerts (Contact Author)

VITO - EnergyVille ( email )

Kenneth Bruninx

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

H. Le Cadre

CEA-LIST ( email )

Gif-sur-Yvette
Cedex, 91191
France

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

Erik Delarue

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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