Should I stay or should I go? The importance of electricity rate design for grid defection
- Feb 6, 2020 7:16 pm GMT
Excited to share a new paper out in the journal Applied Energy! If you like to get wonky with electricity rate design, this paper may be for you. We’ll have it all: fixed charges, grid defection, solar, storage, reliability, and maps to tell the story.
Currently, it is common for utilities to recover a substantial portion of fixed costs through setting variable charges above marginal costs which has adverse implications for efficiency by under-incentivizing consumption (e.g. electrification of heating or transportation) and over-incentivizing the adoption of technologies that can substitute for grid electricity (e.g. installing rooftop solar).
In this paper, we ask what if variable rates are adjusted to real time prices and fixed charges are increased to recoup the costs? We perform this calculation and compare the ‘current rates’ to a scenario we call ‘private marginal cost’ (PMC). In the PMC scenario, some customers (particularly low demand ones) might decide to install solar+storage.
Overall, we show that utilities and regulators seeking to limit rooftop solar adoption by lowering variable charges face a significant possibility that the corresponding increase in fixed charges could lead to inefficient grid defection. We find a key parameter is reliability. If users are willing participate in flexible demand programs, grid defection via solar+storage becomes much easier.
Read more details in the URL to the publication, free to download for the next month!
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