IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v332y2023ics0306261922017457.html
   My bibliography  Save this article

Death spiral, transmission charges, and prosumers in the electricity market

Author

Listed:
  • Chen, Yihsu
  • Tanaka, Makoto
  • Takashima, Ryuta

Abstract

The presence of prosumers with distributed renewable energy has been viewed as an effective way of enhancing the power sector’s resilience. The current transmission charge is designed mainly to recover lumpy transmission investments and other routine costs. Thus, a decline in the reliance on the bulk power market owing to an increase in consumers becoming prosumers shifts transmission costs to traditional consumers, a situation known as a “death spiral”. This study examines how the presence of prosumers affects the transmission charge and market outcomes by explicitly considering their optimization problem in the market. A prosumer is formulated either as a price-taker or as a strategic entity, and is assumed to make his/her own decision on the amounts of consumption, dispatchable energy to produce, and energy to sell into or buy from the bulk energy market, subject to non-dispatchable renewable output. We refute the common belief, demonstrating that the transmission charge does not necessarily increase with the proportion of prosumers in the market. The bulk power market could benefit from lower power prices owing to the prosumers’ renewable production with low marginal costs. Strategic prosumers may cause the transmission charge to increase because they reduce their procurement from the bulk energy market. Therefore, our analysis contributes to the recent debate on transmission costs in the presence of prosumers.

Suggested Citation

  • Chen, Yihsu & Tanaka, Makoto & Takashima, Ryuta, 2023. "Death spiral, transmission charges, and prosumers in the electricity market," Applied Energy, Elsevier, vol. 332(C).
    • Handle: RePEc:eee:appene:v:332:y:2023:i:c:s0306261922017457
    DOI: 10.1016/j.apenergy.2022.120488
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261922017457
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.apenergy.2022.120488?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Axel Gautier & Julien Jacqmin & Jean-Christophe Poudou, 2018. "The prosumers and the grid," Journal of Regulatory Economics, Springer, vol. 53(1), pages 100-126, February.
    2. Steven A. Gabriel & Antonio J. Conejo & J. David Fuller & Benjamin F. Hobbs & Carlos Ruiz, 2013. "Complementarity Modeling in Energy Markets," International Series in Operations Research and Management Science, Springer, edition 127, number 978-1-4419-6123-5, December.
    3. Manuel de Villena, Miguel & Jacqmin, Julien & Fonteneau, Raphael & Gautier, Axel & Ernst, Damien, 2021. "Network tariffs and the integration of prosumers: The case of Wallonia," Energy Policy, Elsevier, vol. 150(C).
    4. M. Seetharama Gowda & Jong-Shi Pang, 1992. "On Solution Stability of the Linear Complementarity Problem," Mathematics of Operations Research, INFORMS, vol. 17(1), pages 77-83, February.
    5. Makoto Tanaka & Antonio J. Conejo & Afzal S. Siddiqui, 2022. "Economics of Power Systems," International Series in Operations Research and Management Science, Springer, number 978-3-030-92871-1, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bożena Gajdzik & Magdalena Jaciow & Radosław Wolniak & Robert Wolny & Wieslaw Wes Grebski, 2023. "Assessment of Energy and Heat Consumption Trends and Forecasting in the Small Consumer Sector in Poland Based on Historical Data," Resources, MDPI, vol. 12(9), pages 1-33, September.
    2. Bożena Gajdzik & Magdalena Jaciow & Radosław Wolniak & Robert Wolny & Wieslaw Wes Grebski, 2023. "Energy Behaviors of Prosumers in Example of Polish Households," Energies, MDPI, vol. 16(7), pages 1-26, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gunkel, Philipp Andreas & Kachirayil, Febin & Bergaentzlé, Claire-Marie & McKenna, Russell & Keles, Dogan & Jacobsen, Henrik Klinge, 2023. "Uniform taxation of electricity: incentives for flexibility and cost redistribution among household categories," Energy Economics, Elsevier, vol. 127(PB).
    2. Ansarin, Mohammad & Ghiassi-Farrokhfal, Yashar & Ketter, Wolfgang & Collins, John, 2022. "A review of equity in electricity tariffs in the renewable energy era," Renewable and Sustainable Energy Reviews, Elsevier, vol. 161(C).
    3. Ansarin, Mohammad & Ghiassi-Farrokhfal, Yashar & Ketter, Wolfgang & Collins, John, 2022. "Economic inefficiencies of pricing distributed generation under novel tariff designs," Applied Energy, Elsevier, vol. 313(C).
    4. Athir Nouicer, Leonardo Meeus, and Erik Delarue, 2023. "The Economics of Demand-side Flexibility in Distribution Grids," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    5. Awad, Ahmed S.A. & Ahmed, Mohamed Hassan & El-Fouly, Tarek H.M. & Salama, Magdy M.A., 2017. "The impact of wind farm location and control strategy on wind generation penetration and market prices," Renewable Energy, Elsevier, vol. 106(C), pages 354-364.
    6. Karan N. Chadha & Ankur A. Kulkarni, 2022. "On independent cliques and linear complementarity problems," Indian Journal of Pure and Applied Mathematics, Springer, vol. 53(4), pages 1036-1057, December.
    7. Megy, Camille & Massol, Olivier, 2023. "Is Power-to-Gas always beneficial? The implications of ownership structure," Energy Economics, Elsevier, vol. 128(C).
    8. Christos N. Dimitriadis & Evangelos G. Tsimopoulos & Michael C. Georgiadis, 2021. "A Review on the Complementarity Modelling in Competitive Electricity Markets," Energies, MDPI, vol. 14(21), pages 1-27, November.
    9. van der Laan, G. & Talman, A.J.J. & Yang, Z.F., 2005. "Computing Integral Solutions of Complementarity Problems," Other publications TiSEM b8e0c74e-2219-4ab0-99a2-0, Tilburg University, School of Economics and Management.
    10. Hoang Ngoc Tuan, 2015. "Boundedness of a Type of Iterative Sequences in Two-Dimensional Quadratic Programming," Journal of Optimization Theory and Applications, Springer, vol. 164(1), pages 234-245, January.
    11. Tom Brijs & Daniel Huppmann & Sauleh Siddiqui & Ronnie Belmans, 2016. "Auction-Based Allocation of Shared Electricity Storage Resources through Physical Storage Rights," Discussion Papers of DIW Berlin 1566, DIW Berlin, German Institute for Economic Research.
    12. Egging-Bratseth, Ruud & Holz, Franziska & Czempinski, Victoria, 2021. "Freedom gas to Europe: Scenarios analyzed using the Global Gas Model," Research in International Business and Finance, Elsevier, vol. 58(C).
    13. Xiao Wang & Xinzhen Zhang & Guangming Zhou, 2020. "SDP relaxation algorithms for $$\mathbf {P}(\mathbf {P}_0)$$P(P0)-tensor detection," Computational Optimization and Applications, Springer, vol. 75(3), pages 739-752, April.
    14. Fikru, Mahelet G. & Gautier, Luis, 2023. "Consumption and production of cleaner energy by prosumers," Energy Economics, Elsevier, vol. 124(C).
    15. Zhang, Yongxiong & Zheng, Hua & Lu, Xiaoping & Vong, Seakweng, 2023. "Modulus-based synchronous multisplitting iteration methods without auxiliary variable for solving vertical linear complementarity problems," Applied Mathematics and Computation, Elsevier, vol. 458(C).
    16. Guo-qiang Wang & Yu-jing Yue & Xin-zhong Cai, 2009. "Weighted-path-following interior-point algorithm to monotone mixed linear complementarity problem," Fuzzy Information and Engineering, Springer, vol. 1(4), pages 435-445, December.
    17. Nouicer, Athir & Meeus, Leonardo & Delarue, Erik, 2023. "Demand-side flexibility in distribution grids: Voluntary versus mandatory contracting," Energy Policy, Elsevier, vol. 173(C).
    18. van der Laan, Gerard & Talman, Dolf & Yang, Zaifu, 2011. "Solving discrete systems of nonlinear equations," European Journal of Operational Research, Elsevier, vol. 214(3), pages 493-500, November.
    19. Matar, Walid & Murphy, Frederic & Pierru, Axel & Rioux, Bertrand, 2015. "Lowering Saudi Arabia's fuel consumption and energy system costs without increasing end consumer prices," Energy Economics, Elsevier, vol. 49(C), pages 558-569.
    20. Ahmed S. Alahmed & Lang Tong, 2022. "Integrating Distributed Energy Resources: Optimal Prosumer Decisions and Impacts of Net Metering Tariffs," Papers 2204.06115, arXiv.org, revised May 2022.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:332:y:2023:i:c:s0306261922017457. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.