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RESIDENTIAL NETWORK TARIFFS

Transition to peak-load-based tariffs can be disruptive for different groups of consumers

New network tariffs designed to recover grid operating costs can introduce up to a 500% increase in charges for some households. A transition from volumetric to peak-load-based tariffs will require targeted policy measures such as clear price signals, information about household electricity consumption and temporary compensation or mitigation mechanisms.

Messages for policy

  • New tariffs designed to support continued network charges in the face of increased electricity self-consumption should include cost transparency and set the right consumer incentives.

  • The low predictability of tariffs based on peak charges and their potentially high financial impact may result in an increased number of consumer complaints. Procedures will need to be introduced to handle this.

  • Impact of alternative tariffs on household budgets is largely dependent on the household’s economic status. Mitigation mechanisms to deal with hardship cases, at least during the transition phase, are required.

  • Tariffs that combine measured peak demand and volumetric components can help manage increased self-consumption and rebalance the distribution of network costs across customers irrespective of their socioeconomic status.

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References

Further Reading

  • Study on Tariff Design for Distribution Systems (European Commission, 2015). This work analyses regulatory schemes applied in the member states to electricity and gas distribution, identifies best practices and makes recommendations for the European Commission on the desirable features of distribution tariff regulation.

  • Küfeoğlu, S. & Pollitt, M. The impact of PVs and EVs on domestic electricity network charges: a case study from Great Britain. Energy Policy 127, 412–424 (2019). This study shows that the distribution tariffs in Great Britain will be dominated by electric vehicles in the future and that future electric vehicles and photovoltaics penetration projections indicate that the distribution tariffs will likely decrease for all customers in Great Britain.

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  • Pérez-Arriaga, I. J. & Smeers, Y. in Transport Pricing of Electricity Networks (ed Lévêque, F.) Ch. 7 (Springer, 2003). This work d escribes the fundamentals of defining network tariffs.

  • Simshauser, P. Distribution network prices and solar PV: resolving rate instability and wealth transfers through demand tariffs. Energy Econ. 54, 108–122 (2016).This study shows the extent of wealth transfers from non-solar households to solar households under traditional network tariff schemes.

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Acknowledgements

The original research was done as a part of PEAKapp project that has received funding under the European Union’s Horizon 2020 research and innovation programme, grant agreement no. 695945 (http://www.peakapp.eu/). A. K. received additional funding from the Austrian Ministry for Transport, Innovation and Technology (no. 848114). D. E. and C. F. gratefully acknowledge the financial support by the Austrian Federal Ministry of Science, Research and Economy, the Austrian National Foundation for Research, Technology and Development and the Federal State of Salzburg.

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Correspondence to Johannes Reichl.

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Azarova, V., Engel, D., Ferner, C. et al. Transition to peak-load-based tariffs can be disruptive for different groups of consumers. Nat Energy 4, 829–830 (2019). https://doi.org/10.1038/s41560-019-0479-y

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  • DOI: https://doi.org/10.1038/s41560-019-0479-y

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