Alternative Tariff Research Articles

On grid-serving grid tariff design in Local Energy Markets

Local Energy Markets (LEMs) are virtual market places that allow for energy sharing of prosumers in proximity to each other. In LEMs, participants’ offers and bids are coordinated by a pricing mechanism, which sets price signals for generation and loads. This impacts distribution grid utilization. Dynamic grid fees could be used by the distribution system operator to add price signals for market participants that are beneficial to the distribution grid operation. To develop such a grid-serving LEM design, we propose a framework for the design of alternative grid tariffs as a trade-off between cost-reflective and cost-recovering grid tariffs. We analyse three alternative grid tariff components in the context of LEMs: time-varying energy fees, critical peak pricing (CPP) and capacity fees for power not traded on the LEM. A case study on a synthetically generated grid region shows that while the alternative tariff components can reduce the aggregated peak load of the region by up to 31% with the CPP, the fees can also lead to increased line utilization. Also, while total local added value can be increased with all alternative grid tariffs, especially capacity-based grid tariffs are connected to a strong redistribution of grid costs from flexible to inflexible prosumers.

Organization of parking space in the central part of Volgograd

An increase in the level of motorization of the population, changes in the density of residential and commercial and office buildings, the functional use of buildings and structures in areas adjacent to urban roads contribute to an increase in the intensity of motor transport and require measures to increase the capacity of the city's road network. Unauthorized parking of personal vehicles on the carriageway of streets and roads leads to a decrease in capacity, and during rush hour to an increase in accidents, which largely necessitates the organization of paid parking space, especially in the central areas of large cities. The authors analyzed the methods of calculating the cost of using paid parking in the cities of the Russian Federation, and justified the feasibility of using the methodology to calculate the cost of using paid parking in the central part of the city. Volgograd based on a comparison with an alternative tariff calculation method based on calculating the cost of creating and maintaining paid parking lots and existing tariffs for parking in large cities of the Russian Federation. The justification of the required number of parking spaces and the minimum fee for parking vehicles, depending on the size of the cars, the axial load of vehicles, the intensity of vehicle traffic in parking areas, has been carried out, the need for parking spaces has been determined. The proposed methodology is quite simple and understandable to users of highways.

Serving two masters – How dual price signals can undermine demand flexibility

Demand-side flexibility is often encouraged via demand response programs, where users are incentivized to adjust their electricity consumption based on price signals in tariffs. The design and implementation of these signals are vital, as they link conditions of the energy system with user behaviour. As a result of energy system separation into stages of generation, many users are required to simultaneously respond to two price signals. While existing research has mainly examined responses to a single signal, this study highlights the complexities when users must react to two signals simultaneously. It presents a case study using two distinct price signals: real-time pricing (RTP) and a demand charge, analysing the implications such dual price signals could have on users. The study reveals the empirical incompatibility of these signals, leading to conflicting user goals. Such interference complicates decision-making for demand flexibility, potentially eroding user trust in retailers and system operators. The study ends with proposing an alternative tariff, resolving the dual price situation, which facilitates user comprehension and decision-making, and thus enhances the potential for demand flexibility.

Balancing DSO interests and PV system economics with alternative tariffs

Distributed rooftop photovoltaics (PV) is one of the pillars of the energy transition yet their widespread integration strains grids, leading to over-voltage, reverse power flow, and infrastructure strain. Furthermore, increased PV self-consumption reduces imported electricity, posing challenges for cost recovery by Transmission System Operators (TSOs) and Distribution System Operators (DSOs), whose grid costs were traditionally tied to volumetric tariffs. To investigate whether alternative tariffs could mitigate PV impacts at the distribution level without hampering PV development, we assess five electricity tariffs that could help the DSOs to recover the costs of maintaining the distribution grid. We also analyze their effects on private storage investment and their implications for urban, semi-urban, and rural low-voltage networks. We found that tariffs with a capacity-based component promote further adoption of PV and storage. At the same time, they allow the DSOs to recover the grid cost without incurring relevant economic differences for the customer. Our study found that alternative tariffs like dynamic and capacity-based tariffs promote the adoption of storage and PV systems. While no single tariff alone can fully mitigate PV impacts at the distribution level, our results point towards the need of managing PV export through solutions like PV curtailment.

Sequential tariffs with increasing marginal costs

AbstractThis study examines the superiority of the discriminatory and uniform tariff regimes under both simultaneous and sequential arrangements in terms of social and global welfare by considering asymmetrically increasing marginal costs among exporters. Under Cournot competition, the importing country has an incentive to manipulate the tariff structure using a sequential tariff arrangement, which implies that it prefers to impose tariff on a low‐cost exporter first and a high‐cost exporter later. Sequential discriminatory (uniform) tariffs can achieve Pareto superiority from the perspective of consumer surplus, and social and global welfare if product differentiation is low (high). It is mainly because high‐cost (low‐cost) exporters are handicapped (subsidized) under alternative tariff regimes. In contrast to previous research, our analysis suggests the possibility that preferences for tariff regimes will change in the same direction for consumer surplus, social welfare, and global welfare.

The determinants of domestic water demand and the equity of tariffs: Empirical evidence from an Italian municipality

Since the seventies, an increasing block tariff regime (IBT) for water services has been in force in Italy to prevent water from being wasted and to ensure that all citizens can access an essential amount of water at low prices. This article describes an empirical analysis, based on an original household-level administrative data- base from an Italian municipality, that has three objectives: i) to verify the assump- tions underlying the IBT by estimating the main determinants of water demand, ii) to assess equity and affordability of the tariff in force, iii) to evaluate the effects of alternative tariffs, which take into account the household size and provide a sub- sistence minimum free of charge, and of subsidies targeted to families with limited means. The main results show a basically inelastic demand with respect to price and income, a regressive effect of the current water tariff and a significant propor tion of families at risk of affordability, particularly among single and larger house- holds. Alternative tariff methods would not be able to improve the equity of the system because the relationship between consumption and income is too weak. Only effective subsidies targeted to families with limited means can make a difference.

Financial Implications of Tariffs for Medical Oxygen on Rwandan Public Hospitals' Finance Management During the Coronavirus Epidemic.

In Rwanda, provider reimbursements for oxygen are based on the duration of patient consumption at a fixed hourly tariff rate. This study sought to assess whether the current insurance tariff in Rwanda was adequate to cover the costs of oxygen used in oxygen therapy and to explore alternative tariff models.The assessment found that hospitals make a marginal surplus from low volume flow rate patients and incur losses from patients who require high volume flow rates. In high volume nonspecialized hospitals with a large pool of patients consuming medical oxygen, low flow rate usage patients (e.g., neonates) tend to subsidize high flow usage patients (surgery), if the number of patients consuming low flow oxygen is higher than the latter. The study found that the current tariff was sufficient before the exponential surge in demand for high flow usage during the peak of the COVID-19 pandemic. A variable tariff that factors both the duration (hours) and the volume (liters) used during the therapy may require more work but better reflects the cost of consumption in each ward. A case-based payment model provides a standard pricing framework based on the patient's diagnosis, intervention, and intensity of treatment.This study highlights the need for a transition from the time-based tariff structure to a case-based or volume-based tariff to incentivize sustainable production and provision (supply) of medical oxygen services at health facilities in Rwanda. Social health insurance reimbursement tariffs for medical oxygen need to reflect both duration and volume of consumption because oxygen therapy varies based on intervention, disease severity, patient age, length of stay, and responsiveness to treatment.

Alternative tariff structures and household composition: Evidence from Spain's Valencia region

Water pricing is one of the fundamental tools for water resources management. However, the current tariff structure in Spain has associated problems in relation to the composition of households. This paper analyses the current tariffs of Spain's Valencia region and studies the effect of alternative tariff structures. The results show an imbalance irrespective of the tariff applied even when the number of household members is considered, as the relationship between the number of household members and water consumption is not linear. Therefore, the problem is not the tariff structure per se but not including the composition of the household in the tariff.

Impacts of import restrictions on poultry producers in Ghana

Abstract This paper investigates the potential effects of trade restrictions and alternative tariff policies, including a tariff wedge between feed and final products on the Ghanaian poultry producers. We apply a hybrid approach that uses qualitative results of a Delphi study to define scenarios for a modified global general equilibrium model. The projected production changes are then used as inputs into a typical farm analysis that disentangles the effects for broiler farm types in Ghana. The effect of expanding a tariff wedge between final and feed products by 5 per cent, either through increasing the tariff rates of the final product or through abolishing the tariffs on feed products, is small in our case. However, increasing the tariff rate of the final product to the maximum level of bound tariff (i.e. 99 per cent) or a complete ban has a larger effect on domestic production. It increases the production by 104 per cent and up to 254 per cent, respectively. The typical farm analysis reveals that large-scale farms are better positioned to increase production than small and medium farm types.

Welfare and Redistribution in Residential Electricity Markets with Solar Power

Abstract An increasing number of households installing solar panels and consuming the energy thus produced raises two challenges for regulators: network financing and vertical equity. We propose alternative tariff and subsidy designs for policymakers to incentivize solar panel adoptions and guarantee that network costs are recovered, while trading off efficiency, equity, and welfare motives. We estimate a structural model of energy demand and solar panel adoption, using a unique matched dataset on energy consumption, prices, income, wealth, solar panel installations, and building characteristics for 165,000 households in Switzerland from 2008 to 2014. Our counterfactuals recommend the optimal solar panel installation cost subsidies and two-part energy tariffs to achieve a solar energy target. We show that, relative to installation cost subsidies, relying on marginal prices to incentivize solar panel adoptions is more cost efficient and progressive across the income distribution, but generates a larger aggregate welfare loss.

The price elasticity of electricity demand when marginal incentives are very large

Using unique data on Swedish households, we measure the price elasticity of electricity demand for households facing a mandatory non-linear distribution tariff, where households are charged based on their maximum consumption during a month, and where the marginal incentives are very large. We estimate the price elasticity using both 2SLS and bunching estimators, and we find that the price elasticity is smaller than what many previous studies on electricity demand have found.We show that the 2SLS estimates are not robust to changes to the set of controls or to the sample definition, while the bunching estimates suggest that the price elasticity of electricity demand is small in response to the large marginal incentives.Furthermore, we illustrate why charging households based on maximum consumption during a month leads to weak incentives in the end of the month, and discuss alternative tariff designs.

Assessing the Performance of Water and Sanitation Tariffs: The Case of Nairobi, Kenya

AbstractPolicymakers and utility managers can use a variety of tariff structures to calculate customers' bills for water and sanitation services, ranging from a simple fixed monthly fee to complicated multi‐part tariffs with seasonal pricing based on metered water use. This study examines the performance of several alternative tariff structures for water and wastewater services in Nairobi, Kenya using a dynamic tariff simulation model applied to a complete set of billing records from Nairobi City Water and Sewer Company. Simulations show that a uniform volumetric price tariff structure performs as well as or better than several increasing block tariff (IBT) structures across the six performance metrics considered (customer welfare, social welfare, cost recovery, the subsidy delivered through the tariff, subsidy incidence, and water conservation). These findings are robust to changes in the level of cost recovery. This finding challenges the wisdom of the widespread use of IBTs in low‐ and middle‐income countries and current perceptions of best practice in tariff design.

Social tariffs and democratic choice-Do population-based health state values reflect the will of the people?

In economic evaluations of health technologies, health outcomes are commonly measured in terms of quality-adjusted life years (QALYs). QALYs are the product of time and health-related quality of life. Health-related quality of life, in turn, is determined by a social tariff, which is supposed to reflect the public's preference over health states. This study argues that, because of the tariff's role in the societal decision-making process, it should not be understood as merely an operational (statistical) definition of health, but as a major instrument of democratic participation. I outline what implications this might have for both the method used to aggregate individual preferences, and the set of individuals whose preferences should count. Alternative tariff specifications and decision rules are explored, and future research directions are proposed.

PERSEPSI KENYAMANAN DAN HARGA TERHADAP MINAT PENGGUNAAN JASA TRANSPORTASI ANGKUTAN UMUM KOTA DI KABUPATEN PURWAKARTA

Reduced interest in the use of city public transport services because there are still many public transport facilities that do not attach importance to the convenience of service users and the absence of alternative tariff options for long distance or short distance, so service users choose to use other transportation services that can answer their needs, such as transportation online that already exists in Purwakarta today. In this case the author is very interested in conducting research, with the title "The Influence of Perceptions of Comfort and Price Against Interest in the Use of City Public Transportation Transportation Services in Purwakarta District". The purpose of this study was to determine the effect of perceived comfort and price on the interest in using the City Public Transport Service in Purwakarta Regency. In this study respondents were users of public transportation services in Purwakarta using sampling techniques called Non-Probability Sampling. The research method used is descriptive qualitative method, which is a method that is done by collecting, presenting and analyzing data that gives a clear enough picture of the object under study. This study uses a multiple linear regression analysis model with the help of IBM SPSS 21 program. Hypothesis This study shows that the variables of perceived comfort and price have a positive and significant effect on the interest in using public transportation services in the city of Purwakarta.

Electricity grid tariffs as a tool for flexible energy systems: A Danish case study

Electricity grid tariffs are a lever for reinforcing the coupling of district heating systems to the electricity system and for activating flexibility from power-to-heat (P2H) technologies and storage capacities. This study assesses three tariffs that permit a flexible use of electric boilers in a representative district heating system in Denmark. A mixed integer programming model is developed to evaluate the impact of each tariff on district heating flexibility quantitatively. The tariffs are then discussed in the light of the regulatory requirements that network tariffs must comply with.We show that alternative tariffs enhance the business case for P2H technologies to run flexibly, support the replacement of fossil fuels by green electricity and lower the overall cost of supplying heat. The attributes of each tariff create significant trade-offs between simplicity of implementation, cost efficiency at the distribution-grid level and cost-recovery for distribution system operators. Ultimately, new tariffs should be designed based on the characteristics of their respective groups of users in acknowledging features such as flexibility potential, substitutability between energy sources and captivity.

Impact of increased solar penetration on bill savings of net metered residential consumers in India

The modernization of the grid and increased renewable penetration had led to a requirement of alternative tariff mechanisms for the consumers. The increasing PV deployment trend, as well as implementation of smart meters under smart grid pilot projects in India, opened up avenues for alternative retail rates and net metering policies. The rooftop PV deployment had led to an increase in the number of net metered consumers. The present work studies the impact of different retail rate mechanisms on bill savings of net metered consumers, with increasing solar penetration scenario. Seven different scenarios, based on increasing solar penetration in the energy mix, are designed. After simulating wholesale electricity prices through a unit commitment based energy system model, retail rates (two time-invariant and three time-variant) are designed using simulated electricity prices. To evaluate the impact of increasing PV penetration on consumer economics, the electricity bills of 97 net metered consumers are calculated using designed retail rates for all the scenarios. It is observed from the results, that the value of bill savings decreases with increasing PV penetration for all the retail rates. Also, the decrease in the value of bill savings is more in time-variant rates as compared to time-invariant rates.

Bonus-Malus Systems with Two-Component Mixture Models Arising from Different Parametric Families

Two-component mixture distributions defined so that the component distributions do not necessarily arise from the same parametric family are employed for the construction of Optimal Bonus-Malus Systems (BMSs) with frequency and severity components. The proposed modeling framework is used for the first time in actuarial literature research and includes an abundance of alternative model choices to be considered by insurance companies when deciding on their Bonus-Malus pricing strategies. Furthermore, we advance one step further by assuming that all the parameters and mixing probabilities of the two component mixture distributions are modeled in terms of covariates. Applying Bayes' theorem we derive optimal BMSs either by updating the posterior probability of the policyholders’ classes of risk or by updating the posterior mean and the posterior variance. The resulting tailor-made premiums are calculated via the expected value and variance principles and are compared to those based only on the a posteriori criteria. The use of the variance principle in a Bonus-Malus ratemaking scheme in a way that takes into consideration both the number and the costs of claims based on both the a priori and the a posterior classification criteria has not yet been proposed and can alter the resulting premiums significantly, providing the actuary with useful alternative tariff structures.

The Effect of Import Tariff Policy on Indonesian Soybean Consumption and Production

This study aims to determine the factors affecting consumption and production ofnational soybean and the effect of soybean import tariff on domestic soybeanconsumption and production. This research was conducted in March - April 2017.The data used in this study is a secondary data in form of annual with a time seriesof 30 years ranged from 1986-2015. The result shows that the import quantity ofsoybean is affected by the variable of exchange rate; soybean consumption andimport tariff. The price of imported soybean and exchange rate significantly affectdomestic soybean price. While domestic soybean price and population significantlyinfluence soybean consumption where a soybean productivity is highly responsiveto wage rates. The simulation result shows that the quantity of imported soybean andsoybean consumption increase with the tariff exemption (T = 0%) compared tocondition when it is applied. Whereas, the domestic soybean price decreases at theexemption of tariffs compared to a condition when it is applied. Our study revealsthat the application of tariffs had no effect on soybean production and productivity.The result of forecasting without alternative tariff imports, which has been analysedduring the next 7 years, shows that in the next few years, Indonesia will not be ableto achieve the self-sufficiency of soybeans.

New era / new solutions: The role of alternative tariff structures in water supply projects

Water utilities face different challenges that may force them to seek prioritized objectives. When doing so, particular projects may have to be developed, being important to understand their impact on water tariffs, and thus, on customers. Such consequences may bear an increased relevance in cases stressed with, e.g., resource scarcity, poverty, and the need for infrastructure investments. The resulting cost and revenue variability demand a comprehensive study. If the first may require a stochastic modeling (in major cost components) in order to consider its inherent uncertainty, the second needs to be modeled following context-specific objectives set by the relevant stakeholders. The solutions achieved will likely promote distinct revenue sources, as well as diversified water tariff structures. A multi-objective optimization model (i.e., a Framework for Suitable Prices) is built to deal with those diversified requirements (e.g., stochastic energy costs, affordability, cost recovery, or administrative simplicity). The model is solved through achievement scalarizing functions with several weighting coefficients for a reference point, so as to provide a significant perception of possible revenue options (and their impact) to the decision makers. The proposed method is applied to a case study, Boa Vista Island in Cabo Verde, in which the background characteristics, namely water sources availability (e.g., the adoption of desalination technologies), economic development and other contextual factors were considered. The key role of tariff structure selection is displayed, instead of assuming it a priori, giving important insights regarding project feasibility.

Tariffs, Smuggling and Economic Welfare: A Spatial Analysis of Nigerian Rice Policy Options

In this paper, we analyse the welfare implications of alternative tariff rates in Nigeria given the government's goals of spurring domestic production and reducing imports utilising a spatial multi-market model that explicitly takes into account the potential for smuggling. Because smuggling occurs through the diversion of imports from the official port of entry in the south to the north, our modelling framework also captures the spatial effects of higher tariffs on changes in rural and urban prices, production and consumption, the flow of trade, and welfare, across different parts of the country. Results show that tariff rates that exceed about 40% introduce some smuggling through the north when it becomes more profitable than importing through official channels in the south. It is also at this tipping point that government tariff revenues are maximised. At higher tariff rates with smuggling, the south experiences greater welfare losses, especially in urban areas.