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Regional distribution effects of different electricity network tariff designs with a distributed generation structure: The case of Germany

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  • Hinz, Fabian
  • Schmidt, Matthew
  • Möst, Dominik

Abstract

The growing share of distributed generation and the corresponding need for grid extensions are anticipated to considerably influence electricity grid tariffs in the future. Depending on the regulatory framework and demand structure of the respective country, the necessary expansion measures being taken are disparately affecting different regions. With the underlying public support for the energy system transformation taking place across Europe crucial to its success, mechanisms to facilitate a cost-reflective and non-discriminatory cost distribution should be investigated. Based on a classification of critical factors responsible for regional discrepancies, we model and estimate residential customers’ tariffs in Germany and their regional distributional disparities while assessing various reform measures. The findings show that the overall tariff rates in Germany and the already existing regional disparities are poised to increase substantially by 2025. A tariff corridor and deep first connection charges considerably limit tariffs and increase distributional equity amongst regions. A generation tariff alters the distribution and reduces the highest tariffs. An energy-based tariff that neglects the impact of prosumers further aggravates the regional distributional disparities. This paper gives insights into the challenges of cost allocation within electricity grids and intends to help to design an adequate and fair cost allocation mechanism.

Suggested Citation

  • Hinz, Fabian & Schmidt, Matthew & Möst, Dominik, 2018. "Regional distribution effects of different electricity network tariff designs with a distributed generation structure: The case of Germany," Energy Policy, Elsevier, vol. 113(C), pages 97-111.
    • Handle: RePEc:eee:enepol:v:113:y:2018:i:c:p:97-111
    DOI: 10.1016/j.enpol.2017.10.055
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    7. Lyu, Yuan & He, Yongxiu & Li, Shanzi & Zhou, Jinghan & Li, Bo, 2024. "Impact of grid connection cost channeling mechanisms on the development of distributed photovoltaic: The case of China," Energy Policy, Elsevier, vol. 187(C).
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    9. Jessica Thomsen & Christoph Weber, "undated". "How the design of retail prices, network charges, and levies affects profitability and operation of small-scale PV-Battery Storage Systems," EWL Working Papers 1903, University of Duisburg-Essen, Chair for Management Science and Energy Economics.
    10. Axel Gautier & Julien Jacqmin, 2020. "PV adoption: the role of distribution tariffs under net metering," Journal of Regulatory Economics, Springer, vol. 57(1), pages 53-73, February.
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    14. Ahlrichs, Jakob & Rockstuhl, Sebastian & Tränkler, Timm & Wenninger, Simon, 2020. "The impact of political instruments on building energy retrofits: A risk-integrated thermal Energy Hub approach," Energy Policy, Elsevier, vol. 147(C).
    15. Claudia Gunther & Wolf-Peter Schill & Alexander Zerrahn, 2019. "Prosumage of solar electricity: tariff design, capacity investments, and power system effects," Papers 1907.09855, arXiv.org.
    16. Darya Pyatkina & Tamara Shcherbina & Vadim Samusenkov & Irina Razinkina & Mariusz Sroka, 2021. "Modeling and Management of Power Supply Enterprises’ Cash Flows," Energies, MDPI, vol. 14(4), pages 1-17, February.
    17. Lisa Schlesewsky & Simon Winter, 2018. "Inequalities in Energy Transition: The Case of Network Charges in Germany," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 102-113.
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    19. Arnold, Fabian & Jeddi, Samir & Sitzmann, Amelie, 2022. "How prices guide investment decisions under net purchasing — An empirical analysis on the impact of network tariffs on residential PV," Energy Economics, Elsevier, vol. 112(C).

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