IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v165y2022ics0301421522001975.html
   My bibliography  Save this article

Capacity subscription grid tariff efficiency and the impact of uncertainty on the subscribed level

Author

Listed:
  • Bjarghov, Sigurd
  • Farahmand, Hossein
  • Doorman, Gerard

Abstract

While volume-based grid tariffs have been the norm for residential consumers, capacity-based tariffs will become more relevant with the increasing electrification of society. A further development is capacity subscription, where consumers are financially penalised for exceeding their subscribed capacity, or alternatively their demand is limited to the subscribed level. The penalty or limitation can either be static (always active) or dynamic, meaning that it is only activated when there are active grid constraints. We investigate the cost impact for static and dynamic capacity subscription tariffs, for 84 consumers based on six years of historical load data. We use several approaches for finding the optimal subscription level ex ante. The results show that annual costs remain both stable and similar for most consumers, with a few exceptions for those that have high peak demand. In the case of a physical limitation, it is important to use a stochastic approach for the optimal subscription level to avoid excessive demand limitations. Facing increased peak loads due to electrification, regulators should consider a move to capacity-based tariffs in order to reduce cross-subsidisation between consumers and increase cost reflectivity without impacting the DSO cost recovery.

Suggested Citation

  • Bjarghov, Sigurd & Farahmand, Hossein & Doorman, Gerard, 2022. "Capacity subscription grid tariff efficiency and the impact of uncertainty on the subscribed level," Energy Policy, Elsevier, vol. 165(C).
  • Handle: RePEc:eee:enepol:v:165:y:2022:i:c:s0301421522001975
    DOI: 10.1016/j.enpol.2022.112972
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421522001975
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.enpol.2022.112972?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bartusch, Cajsa & Wallin, Fredrik & Odlare, Monica & Vassileva, Iana & Wester, Lars, 2011. "Introducing a demand-based electricity distribution tariff in the residential sector: Demand response and customer perception," Energy Policy, Elsevier, vol. 39(9), pages 5008-5025, September.
    2. Scott P. Burger, Christopher R. Knittel, Ignacio J. Perez-Arriaga, Ian Schneider, and Frederik vom Scheidt, 2020. "The Efficiency and Distributional Effects of Alternative Residential Electricity Rate Designs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    3. Brown, Toby & Faruqui, Ahmad & Grausz, Léa, 2015. "Efficient tariff structures for distribution network services," Economic Analysis and Policy, Elsevier, vol. 48(C), pages 139-149.
    4. Backe, Stian & Kara, Güray & Tomasgard, Asgeir, 2020. "Comparing individual and coordinated demand response with dynamic and static power grid tariffs," Energy, Elsevier, vol. 201(C).
    5. Picciariello, Angela & Vergara, Claudio & Reneses, Javier & Frías, Pablo & Söder, Lennart, 2015. "Electricity distribution tariffs and distributed generation: Quantifying cross-subsidies from consumers to prosumers," Utilities Policy, Elsevier, vol. 37(C), pages 23-33.
    6. Neuteleers, Stijn & Mulder, Machiel & Hindriks, Frank, 2017. "Assessing fairness of dynamic grid tariffs," Energy Policy, Elsevier, vol. 108(C), pages 111-120.
    7. Schittekatte, Tim & Momber, Ilan & Meeus, Leonardo, 2018. "Future-proof tariff design: Recovering sunk grid costs in a world where consumers are pushing back," Energy Economics, Elsevier, vol. 70(C), pages 484-498.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hennig, Roman J. & de Vries, Laurens J. & Tindemans, Simon H., 2023. "Congestion management in electricity distribution networks: Smart tariffs, local markets and direct control," Utilities Policy, Elsevier, vol. 85(C).
    2. Stute, Judith & Klobasa, Marian, 2024. "How do dynamic electricity tariffs and different grid charge designs interact? - Implications for residential consumers and grid reinforcement requirements," Energy Policy, Elsevier, vol. 189(C).
    3. Gunkel, Philipp Andreas & Bergaentzlé, Claire-Marie & Keles, Dogan & Scheller, Fabian & Jacobsen, Henrik Klinge, 2023. "Grid tariff designs to address electrification and their allocative impacts," Utilities Policy, Elsevier, vol. 85(C).
    4. Sebastian Schreck & Robin Sudhoff & Sebastian Thiem & Stefan Niessen, 2022. "On the Importance of Grid Tariff Designs in Local Energy Markets," Energies, MDPI, vol. 15(17), pages 1-25, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sigurd Bjarghov & Hossein Farahmand & Gerard Doorman, 2021. "Grid Tariffs Based on Capacity Subscription: Multi Year Analysis on Metered Consumer Data," Papers 2111.06253, arXiv.org.
    2. Vaughan, Jim & Doumen, Sjoerd C. & Kok, Koen, 2023. "Empowering tomorrow, controlling today: A multi-criteria assessment of distribution grid tariff designs," Applied Energy, Elsevier, vol. 341(C).
    3. Küfeoğlu, Sinan & Pollitt, Michael G., 2019. "The impact of PVs and EVs on domestic electricity network charges: A case study from Great Britain," Energy Policy, Elsevier, vol. 127(C), pages 412-424.
    4. Passey, Robert & Haghdadi, Navid & Bruce, Anna & MacGill, Iain, 2017. "Designing more cost reflective electricity network tariffs with demand charges," Energy Policy, Elsevier, vol. 109(C), pages 642-649.
    5. Timothé Beaufils & Pierre-Olivier Pineau, 2018. "Structures tarifaires et spirale de la mort : État des lieux des pratiques de tarification dans la distribution d’électricité résidentielle," CIRANO Working Papers 2018s-27, CIRANO.
    6. Beaufils, Timothé & Pineau, Pierre-Olivier, 2019. "Assessing the impact of residential load profile changes on electricity distribution utility revenues under alternative rate structures," Utilities Policy, Elsevier, vol. 61(C).
    7. Batlle, Carlos & Mastropietro, Paolo & Rodilla, Pablo, 2020. "Redesigning residual cost allocation in electricity tariffs: A proposal to balance efficiency, equity and cost recovery," Renewable Energy, Elsevier, vol. 155(C), pages 257-266.
    8. Javier Borquez & Hector Chavez & Karina A. Barbosa & Marcela Jamett & Rodrigo Acuna, 2020. "A Simple Distribution Energy Tariff under the Penetration of DG," Energies, MDPI, vol. 13(8), pages 1-17, April.
    9. Cambini, Carlo & Soroush, Golnoush, 2019. "Designing grid tariffs in the presence of distributed generation," Utilities Policy, Elsevier, vol. 61(C).
    10. Calver, Philippa & Simcock, Neil, 2021. "Demand response and energy justice: A critical overview of ethical risks and opportunities within digital, decentralised, and decarbonised futures," Energy Policy, Elsevier, vol. 151(C).
    11. Stute, Judith & Klobasa, Marian, 2024. "How do dynamic electricity tariffs and different grid charge designs interact? - Implications for residential consumers and grid reinforcement requirements," Energy Policy, Elsevier, vol. 189(C).
    12. Clastres, Cédric & Percebois, Jacques & Rebenaque, Olivier & Solier, Boris, 2019. "Cross subsidies across electricity network users from renewable self-consumption," Utilities Policy, Elsevier, vol. 59(C), pages 1-1.
    13. Freitas Gomes, Icaro Silvestre & Perez, Yannick & Suomalainen, Emilia, 2021. "Rate design with distributed energy resources and electric vehicles: A Californian case study," Energy Economics, Elsevier, vol. 102(C).
    14. Gunkel, Philipp Andreas & Kachirayil, Febin & Bergaentzlé, Claire-Marie & McKenna, Russell & Keles, Dogan & Jacobsen, Henrik Klinge, 2023. "Uniform taxation of electricity: incentives for flexibility and cost redistribution among household categories," Energy Economics, Elsevier, vol. 127(PB).
    15. Günther, Claudia & Schill, Wolf-Peter & Zerrahn, Alexander, 2021. "Prosumage of solar electricity: Tariff design, capacity investments, and power sector effects," Energy Policy, Elsevier, vol. 152(C).
    16. Li, Na & Hakvoort, Rudi A. & Lukszo, Zofia, 2021. "Cost allocation in integrated community energy systems - A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 144(C).
    17. Ibrahim Abada & Andreas Ehrenmann & Xavier Lambin, 2018. "Unintended consequences: The snowball effect of energy communities," Working Papers EPRG 1812, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    18. Backe, Stian & Zwickl-Bernhard, Sebastian & Schwabeneder, Daniel & Auer, Hans & Korpås, Magnus & Tomasgard, Asgeir, 2022. "Impact of energy communities on the European electricity and heating system decarbonization pathway: Comparing local and global flexibility responses," Applied Energy, Elsevier, vol. 323(C).
    19. Avau, Michiel & Govaerts, Niels & Delarue, Erik, 2021. "Impact of distribution tariffs on prosumer demand response," Energy Policy, Elsevier, vol. 151(C).
    20. Nijhuis, M. & Gibescu, M. & Cobben, J.F.G., 2017. "Analysis of reflectivity & predictability of electricity network tariff structures for household consumers," Energy Policy, Elsevier, vol. 109(C), pages 631-641.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:165:y:2022:i:c:s0301421522001975. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.