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Electricity distribution tariffs and distributed generation: quantifying cross-subsidies from consumers to prosumers
KTH, School of Electrical Engineering (EES), Electric power and energy systems.
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2015 (English)In: Utilities Policy, ISSN 0957-1787, E-ISSN 1878-4356, Vol. 37, 23-33 p.Article in journal (Refereed) Published
Abstract [en]

An increasing amount of distributed generation (DG) can cause an increase or a decrease on distribution network costs. Tariff design is the main tool for allocating these costs to customers who own and operate DG resources. Currently, however, either DG units are exempt from paying distribution tariffs or they are subject to tariffs originally designed according to a traditional pricing model without DG in the grids, also known as load-based pricing. Partial recovery of the allowed distribution company revenue requirements or cross-subsidies between customers may ensue from such tariff arrangements. In this article, pricing, as represented by a combination of net metering and pure volumetric tariffs, is applied in the context of increasing DG. The paper presents a methodology where a Reference Network Model (RNM) is used to investigate the effect of this pricing scheme on the magnitude of cross-subsidies from consumers towards the so-called prosumers for a set of twelve simulations based on real-size networks in the U.S.For the considered scenarios, the analysis reveals substantial cross-subsidies from consumers toward prosumers. The degree of subsidy varies with the amount of DG connected to the grid and network characteristics. The rate of cross-subsidy tends to be higher for low-density grids. This paper contributes to the net metering literature with a quantitative assessment of cross-subsidies by comparing allocated payments to different actors with the costs they impose on the system, estimated through an RNM. Moreover, the paper proposed a tariff structure based on cost causality by proposing a cost-reflective, volumetric tariff approach through which aggregate load-driven and DG-driven network costs are accordingly allocated to loads and DG units.

Place, publisher, year, edition, pages
Elsevier, 2015. Vol. 37, 23-33 p.
Keyword [en]
Distribution tariffs, Distributed generation, Cost-allocation methodologies, Cost causality, Cross-subsidies
National Category
Engineering and Technology
URN: urn:nbn:se:kth:diva-174863DOI: 10.1016/j.jup.2015.09.007ISI: 000367110700003ScopusID: 2-s2.0-84949495828OAI: diva2:859574

QC 20160121

Available from: 2015-10-07 Created: 2015-10-07 Last updated: 2016-02-05Bibliographically approved
In thesis
1. Impact of Economic Regulation on Distributed Generation Integration in Electricity Distribution Grids
Open this publication in new window or tab >>Impact of Economic Regulation on Distributed Generation Integration in Electricity Distribution Grids
2015 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Energy policies in favor of a larger adoption of renewable energy sources for electricity production purposes and the significant progress of several renewable technologies are among the main drivers behind an increasing integration of distributed generation (DG) in distribution networks.

DG affects distribution network planning and operation and, consequently, higher or lower network costs than in a traditional passive network scenario arise.

Two main complementary tools for an efficient integration of DG have been identified in this thesis: (i) a sound economic regulation of Distribution System Operators (DSOs) for taking into account DG-driven potential costs and accordingly remunerating DSOs, and (ii) network tariff design, in order to allocate network costs and re-distribute potential benefits to different grid users.

Distribution economic regulations vary from country to country with grid characteristics and regulatory customs. In order for Regulators to promote the integration of DG units according to policy objectives, the potential impact of DG on the different distribution costs needs to be analyzed and quantitatively assessed: in this thesis, these objectives are achieved by using a novel model that combines the technical characteristics of distribution grids with the regulatory details specific of each regulation.

Once computed, DSOs' total allowed revenue is allocated to different users' categories according to the adopted tariff structures. This thesis focuses on the challenges arising within the traditional paradigm of distribution tariff design when an increasing amount of DG is connected to the grids. In particular, the consequences of DG exemption from distribution tariffs and the application of load-tailored tariff schemes to DG are investigated, both from a qualitative and quantitative point of view; cross subsidies between consumers and DG owners are computed by applying a cost causality principle.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2015. xi, 90 p.
TRITA-EE, ISSN 1653-5146 ; 2015:75
Distributed generation, distribution economic regulation, regulatory impact, distribution tariff design, cost allocation methodologies, cross subsidies
National Category
Engineering and Technology
Research subject
Electrical Engineering
urn:nbn:se:kth:diva-174342 (URN)978-91-7595-715-9 (ISBN)
Public defence
2015-11-02, F3, Lindstedtsvägen 26, KTH, Stockholm, 10:00 (English)

The Doctoral Degrees issued upon completion of the programme are issued by Comillas Pontifical University, Delft University of Technology and KTH Royal Institute of Technology. The invested degrees are official in Spain, the Netherlands and Sweden, respectively. QC 20151009

Available from: 2015-10-09 Created: 2015-10-05 Last updated: 2015-10-09Bibliographically approved

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