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Locational signals to reduce network investments in smart distribution grids: What works and what not?

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  • Brandstätt, Christine
  • Brunekreeft, Gert
  • Friedrichsen, Nele
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    Abstract

    Locational pricing can reduce the investment needs arising in distribution networks from the transformation towards smart grids with high shares of renewable generation. We analyse different approaches. Locational signals in a general tariff plan for either energy or network pricing require substantial system reform which impedes feasibility. We propose smart contracts with locational elements as hybrid form. System reform is only modest since contractual solutions emerge in smart grids anyhow. The responsibility for tariff setting stays with the network operator. The regulator’s task is limited to incentivizing efficient network investment and allowing network operators maximum flexibility in contract design.

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    Bibliographic Info

    Article provided by Elsevier in its journal Utilities Policy.

    Volume (Year): 19 (2011)
    Issue (Month): 4 ()
    Pages: 244-254

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    Handle: RePEc:eee:juipol:v:19:y:2011:i:4:p:244-254

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    Web page: http://www.elsevier.com/locate/inca/30478

    Related research

    Keywords: Network investment; Distribution networks; Locational pricing; Smart grid;

    References

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    1. Brunekreeft, Gert, 2004. "Market-based investment in electricity transmission networks: controllable flow," Utilities Policy, Elsevier, vol. 12(4), pages 269-281, December.
    2. Brunekreeft, Gert & Neuhoff, Karsten & Newbery, David, 2005. "Electricity transmission: An overview of the current debate," Utilities Policy, Elsevier, vol. 13(2), pages 73-93, June.
    3. Faruqui, Ahmad & Hledik, Ryan & Tsoukalis, John, 2009. "The Power of Dynamic Pricing," The Electricity Journal, Elsevier, vol. 22(3), pages 42-56, April.
    4. Rodri­guez Ortega, Mari­a Pi­a & Pérez-Arriaga, J. Ignacio & Abbad, Juan Rivier & González, Jesús Peco, 2008. "Distribution network tariffs: A closed question?," Energy Policy, Elsevier, vol. 36(5), pages 1712-1725, May.
    5. Lewis, Geoffrey McD., 2010. "Estimating the value of wind energy using electricity locational marginal price," Energy Policy, Elsevier, vol. 38(7), pages 3221-3231, July.
    6. E. Veldman & D.A.M. Geldtmeijer & J. D. Knigge & H. Slootweg, 2010. "Smart Grids Put into Practice: Technological and Regulatory Aspects," Competition and Regulation in Network Industries, Intersentia, vol. 11(3), pages 287-307, September.
    7. Shaw, Rita & Attree, Mike & Jackson, Tim, 2010. "Developing electricity distribution networks and their regulation to support sustainable energy," Energy Policy, Elsevier, vol. 38(10), pages 5927-5937, October.
    8. Jamasb, T. & Neuhoff, K. & Newbery, D. & Pollitt, M., 2005. "Long-term Framework for Electricity Distribution Access Charges," Cambridge Working Papers in Economics 0551, Faculty of Economics, University of Cambridge.
    9. Faruqui, Ahmad & Harris, Dan & Hledik, Ryan, 2010. "Unlocking the [euro]53 billion savings from smart meters in the EU: How increasing the adoption of dynamic tariffs could make or break the EU's smart grid investment," Energy Policy, Elsevier, vol. 38(10), pages 6222-6231, October.
    10. Leuthold, Florian & Weigt, Hannes & von Hirschhausen, Christian, 2008. "Efficient pricing for European electricity networks - The theory of nodal pricing applied to feeding-in wind in Germany," Utilities Policy, Elsevier, vol. 16(4), pages 284-291, December.
    11. Olmos, Luis & Pérez-Arriaga, Ignacio J., 2009. "A comprehensive approach for computation and implementation of efficient electricity transmission network charges," Energy Policy, Elsevier, vol. 37(12), pages 5285-5295, December.
    12. Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-42, September.
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    Cited by:
    1. Nele Friedrichsen, 2011. "Governing Smart Grids - the Case for an Independent System Operator," Bremen Energy Working Papers 0011, Bremer Energie Institut.
    2. Christine Brandstätt & Gert Brunekreeft & Nele Friedrichsen, 2011. "Improving Investment Coordination in Electricity Networks Through Smart Contracts," Bremen Energy Working Papers 0010, Bremer Energie Institut.
    3. Katrin Schmitz & Christoph Weber, 2013. "Does One Design Fit All? On The Transferability Of The PJM Market Design To The German Electricity Market," EWL Working Papers 1302, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Apr 2013.
    4. Claire Bergaentzlé, 2013. "From smart technology to smart consumers: for better system reliability and improved market efficiency," Post-Print halshs-01011169, HAL.

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