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

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  • Christine Brandstätt
  • Gert Brunekreeft
  • Nele Friedrichsen
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    Abstract

    The increasing share of distributed generation causes massive network investment. Energy and network pricing can help to reduce the investment need. This paper examines and discusses different models for locational pricing in the distribution network. Locational energy pricing is largely ineffective when part of the feed-in would not be subject to market prices due to renewable support schemes. Locational network charging works well to guide investment, but does little for short term system operation, which is crucial in smart grids. Both such explicit schemes require a substantial system reform which impedes feasibility. With smart contracts we propose a hybrid form. They are developing in smart grids anyhow and will incorporate locational elements. System reform is only modest since responsibility for tariff setting stays with the network operator. The regulator’s task would be to incentivize the network operator for efficient network investment and allowing maximum flexibility.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0957178711000373
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    Bibliographic Info

    Paper provided by Bremer Energie Institut in its series Bremen Energy Working Papers with number 0007.

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    Length: 30 pages
    Date of creation: Apr 2011
    Date of revision:
    Publication status: Published in Utilities Policy, 19(4), 2011, S. 244-254
    Handle: RePEc:bei:00bewp:0007

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    Web page: http://www.bremer-energie-institut.de/

    Related research

    Keywords: network investment; distribution networks; locational pricing; smart contracts;

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    Cited by:
    1. 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.
    2. Dupont, B. & De Jonghe, C. & Olmos, L. & Belmans, R., 2014. "Demand response with locational dynamic pricing to support the integration of renewables," Energy Policy, Elsevier, vol. 67(C), pages 344-354.
    3. 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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