Locational signals to reduce network investments in smart distribution grids: what works and what not?

Christine Brandstätt, Gert Brunekreeft and Nele Friedrichsen

No 7, Bremen Energy Working Papers from Bremen Energy Research

Abstract: The increasing share of distributed generation causes massive network investment. Energy and network pricing can help to reduce the investment need. This paper examines and discusses different models for locational pricing in the distribution network. Locational energy pricing is largely ineffective when part of the feed-in would not be subject to market prices due to renewable support schemes. Locational network charging works well to guide investment, but does little for short term system operation, which is crucial in smart grids. Both such explicit schemes require a substantial system reform which impedes feasibility. With smart contracts we propose a hybrid form. They are developing in smart grids anyhow and will incorporate locational elements. System reform is only modest since responsibility for tariff setting stays with the network operator. The regulator’s task would be to incentivize the network operator for efficient network investment and allowing maximum flexibility.

Keywords: network investment; distribution networks; locational pricing; smart contracts (search for similar items in EconPapers)
JEL-codes: D23 D43 L22 L51 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2011-04
New Economics Papers: this item is included in nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Published in Utilities Policy, 19(4), 2011, S. 244-254

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Persistent link: https://EconPapers.repec.org/RePEc:bei:00bewp:0007

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