Revisiting Electricity Network Tariffs in a Context of Decarbonization, Digitalization, and Decentralization

Nicolás Morell Dameto, José Pablo Chaves-Ávila and Tomás Gómez San Román
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Nicolás Morell Dameto: Institute for Research in Technology (IIT), ICAI School of Engineering, Comillas Pontifical University, 28015 Madrid, Spain
José Pablo Chaves-Ávila: Institute for Research in Technology (IIT), ICAI School of Engineering, Comillas Pontifical University, 28015 Madrid, Spain
Tomás Gómez San Román: Institute for Research in Technology (IIT), ICAI School of Engineering, Comillas Pontifical University, 28015 Madrid, Spain

Energies, 2020, vol. 13, issue 12, 1-21

Abstract: The electricity system is evolving due to three driven forces: decarbonization, digitalization, and decentralization (3 Ds). Should these three forces occur, electricity network tariffs must be revisited. In most countries, actual network charges incentivize inefficient network usage when volumetric or low granular (temporal and locational) charges are applied. This paper analyses the effect of 3 Ds on tariff design principles and proposes an efficient methodology for network tariff design that promotes efficient usage of the network as well as an equitable share of the costs for network users. The proposed network tariff consists of two components: a peak-coincident and a fixed charge. The peak-coincident forward-looking charge considers the cost of future network reinforcements required, calculated element-by-element, and assigned to customers during the peak utilization hours of each network element. Fixed charges allocate the residual part of the total network costs following equity principles. A simplified network model is used to compare the charges faced by consumers through three tariff structures: (1) a volumetric tariff, (2) a simplified version of the Spanish tariff, and (3) the proposed efficient tariff. This case study highlights the economic benefits of applying a highly granular and peak-coincident tariff structure.

Keywords: electricity network tariffs; tariff principles; customer response; distributed energy resources (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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