The Impact of Network Tariffs on PV Investment Decisions by Consumers

Abstract

The increasing amount of self-produced energy reduces the customer base of network utilities. Assuming constant grid costs, network charges have to be increased in systems applying volumetric network tariffs. In order to understand the cost recovery problem of utilities, it is crucial to analyze consumers' PV investment and operation decisions as sources of self-produced energy. This work proposes a mathematical framework that determines PV investment by consumers subject to the day-ahead market. Volumetric and capacity network tariffs are considered, which are altered by consumers' day-ahead market demand. The optimal PV investment from a central planner's perspective serves as a benchmark. The results show that a volumetric network tariff incentivizes inefficient investments in distributed PV systems, which causes all consumers' energy costs to increase. In contrast, a capacity network tariff reduces these incentives as consumers cannot offset their expected burden of network costs by installing PV systems.