An investigation on fairness perception for grid tariff models: Evidence from Denmark

Abstract

The grid tariff design has become an important issue for green transition and has been understudied. Depending on how costs are allocated to end-users, different network pricing models can have an influence on the success of the green transition. Consumer perceptions of the fairness of varying tariff models are of great importance to policymakers. The objective of this study is to investigate consumer perceptions of fairness of different tariff models in Denmark. These tariff models include capacity charge, transport charge, dynamic tariff, Ramsey, flat tariff, and socialized tariff. A total of 793 usable respondents were included in the analysis. The result indicates that a majority of consumers perceive cost-reflective pricing models to be fair. In contrast, Ramsey pricing was considered to be unfair by most consumers. Furthermore, the heterogeneity in consumer perceptions was captured: the dynamic tariff preferred (56.7%), the transportation tariff preferred (12.1%), and the flat rate preferred (21.2%). The results of this study are expected to contribute to the design of new grid tariff models in Denmark and internationally.