Abstract
Renewable generation is rapidly expanding across many electricity grids, often as distributed renewable energy sources (D-RES). D-RES, such as rooftop solar panels, change a household’s electric relationship with the external grid, demanding a likewise change in its economic relationship with the retailer. In particular, D-RES can impact fairness and economic efficiency considerations for electricity tariffs. We evaluate this impact on 5 tariffs, using per-minute data for 144 households in Austin, TX, USA. Our results show that traditional tariff designs allow for large wealth transfers, often to D-RES owners from non-owners, who may be paying on the median 22% more than their fair share. For economic efficiency, traditional tariffs again perform poorly. Newer time-based (time-of-use, or TOU, and real-time dynamic pricing) tariffs show few signs of cross-subsidization and better economic efficiency. Potential demand elasticity does not significantly alter conclusions for fairness, but significantly impacts those for economic efficiency. Our results clarify how different novel tariff designs in the renewable energy era achieve differing kinds and levels of fairness and efficiency; some acceptable, while others less so.
Highlights
Climate change is a global coordination problem
Renewable generation is rapidly expanding across many electricity grids, often as distributed renewable energy sources (D-RES)
Our results show that traditional tariff designs allow for large wealth transfers, often to D-RES owners from non-owners, who may be paying on the median 22% more than their fair share
Summary
Climate change is a global coordination problem. While most of the world population experiences the consequences of climate change, they are not responsible for its cause, i.e. greenhouse gas emissions. We are not aware of a study that uses a comprehensive set of tariffs based on all components of electricity costs We analyze this matter using per-minute generation and consumption and pricing data from a residential population in Austin, TX, USA. These cross-subsidies are mainly to the benefit of D-RES owners, reaching a peak of over onefifth of their overall electricity costs These cost transfers are likely to be socially regressive, i.e. taxing the poor more than the wealthy [5]. Some residential tariffs are proposed to change to time-dependent and/or demand charge pricing (i.e. pricing household peak demand) For these tariffs, we find lower cross-subsidies by two to three orders of magnitude at the median compared to traditional tariffs.
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