Retail Electricity Tariff and Mechanism Design to Incentivise Distributed Generation

Ramteen Sioshansi

Chapter 9 in Financing Renewable Energy Development in East Asia Summit Countries A Primer of Effective Policy Instruments, pp 267-296 from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: This chapter examines the question of how to incentivise the adoption and use of renewable energy resources, with particular attention given to distributed renewable energy. Prior experience suggests that price and quantity-based programmes such as feed-in tariffs provide more efficient renewable adoption and use and lower costs than programmes that set quantity targets only. Some cost-allocation issues raised by the use of distributed renewable energy systems and fixed time-invariant retail pricing are also examined. This combination can result in customers with distributed renewable energy systems paying a disproportionately small portion of system capacity costs. This chapter suggests two retail-pricing schemes – i.e., real-time pricing and a two-part tariff with demand charges – to address these issues.

Keywords: Distributed generation; retail electricity pricing; incentive mechanisms (search for similar items in EconPapers)
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