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Distribution network prices and solar PV: Resolving rate instability and wealth transfers through demand tariffs

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  • Simshauser, Paul

Abstract

1-in-4 detached households in Southeast Queensland have installed rooftop solar PV—amongst the highest take-up rates in the world. Electricity distribution network capacity is primarily driven by periodic demand, and household load generally peaks in the early evening, whereas solar PV production peaks during the middle of the day and thus a mismatch exists. Compounding matters is the fact that the structure of the regulated two-part network tariff is dominated by a flat-rate variable charge. In this article, interval meter data at the customer switchboard circuit level confirms that solar households use only slightly less peak capacity than non-solar households and, that non-trivial cross-subsidies are rapidly emerging. A tariff model demonstrates that a peak capacity-based ‘demand tariff’ is a more efficient, cost-reflective and equitable pricing structure that improves the stability of tariffs given a rate-of-return regulatory constraint.

Suggested Citation

  • Simshauser, Paul, 2016. "Distribution network prices and solar PV: Resolving rate instability and wealth transfers through demand tariffs," Energy Economics, Elsevier, vol. 54(C), pages 108-122.
    • Handle: RePEc:eee:eneeco:v:54:y:2016:i:c:p:108-122
    DOI: 10.1016/j.eneco.2015.11.011
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General

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