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Energy: uncoupled costs and tariffs

Rafael Herzberg's picture
Consultant energy affairs Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

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  • Nov 8, 2021
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Energy: uncoupled costs and tariffs

There is an important change underway in the electricity sector around the world.

The old fully centralized system is migrating to a mixed one, with an increasingly important component, distributed

Up to now, the tariffs systems have not kept up with this new scenario.

And so there is a gap between costs incurred and tariffs charged, which ends up inefficiently signaling investments and their remuneration involving the entire entire production chain of the electricity sector.

The results is an increase in costs for all consumers, regardless of whether they are being more or less efficient in this new landscape. It is high time to create a tariff systems in line with the new reality. To stimulate efficiency in the right direction!

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Matt Chester's picture
Matt Chester on Nov 8, 2021

And so there is a gap between costs incurred and tariffs charged, which ends up inefficiently signaling investments and their remuneration involving the entire entire production chain of the electricity sector.

Are there any particular stakeholders this benefits over others?

Rafael Herzberg's picture
Rafael Herzberg on Nov 8, 2021

Yes, for example let's take a home owner that installs a rooftop solar PV system. He/she will get the benefit of exporting excess energy produced by the PV using the grid whenever there is a surplus. This is great for the homeowner who is then able to maximize the results of the PV project.

But... the traditional system will have to be there at anytime when there is no sun (even during the day), meaning that all rate payers will have to cope with the investments needed to make sure that there is all the kW capacity needed, when its needed and in the proper amount. 

It means - in other words - that the generation/transmission/distribution will have to be there as if there were no PV. So in real life this capacity will be there BUT with a lower load factor which at the end of the day means higher rates (since they are calculated by the regulator considering the energy consumed for that specific utility company clients.

The same reasoning applies to the effects of the "duck curve". The associated costs are actually transferred to all ratepayers, not just the PV owners. There is a trend to demand that PV systems should be only licensed IF a mitigating energy storage system is there. But not yet in Brazil anyway.

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