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Peak-valley tariffs and solar prosumers: Why renewable energy policies should target local electricity markets

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  • Lin, Boqiang
  • Chen, Jiaying
  • Wesseh, Presley K.

Abstract

There is a growing recognition that local electricity markets (LEMs) for distributed power resources are technically and economically feasible. However, the conditions under which these markets can create value for prosumers and consumers (P&C) and ensure overall welfare for society are insufficiently understood. To help address this literature gap, this paper takes China as a case to study a local electricity market that is driven by peer-to-peer trading. The results show that peak-valley tariffs increase cost-savings for P&C at the expense of grid revenue and the larger the peak-valley spread, the greater the benefits to P&C and, hence, losses to the grid. In addition, the study finds that the value of solar PV declines when deployment of solar technology increases linearly with storage installation in the market. Because the declining value of variable renewable energy may be especially problematic in wholesale electricity markets (WEMs), this study argues that as long as storage installation increases at a faster rate than variable renewable energy deployment, LEMs that operate independent of the central grid can potentially offer a more cost-effective option for large-scale renewable energy utilization. These results underscore the importance of government policies that seek to promote the development of LEMs.

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  • Lin, Boqiang & Chen, Jiaying & Wesseh, Presley K., 2022. "Peak-valley tariffs and solar prosumers: Why renewable energy policies should target local electricity markets," Energy Policy, Elsevier, vol. 165(C).
    • Handle: RePEc:eee:enepol:v:165:y:2022:i:c:s0301421522002099
    DOI: 10.1016/j.enpol.2022.112984
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    References listed on IDEAS

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    1. Lyu, Yuan & He, Yongxiu & Zhou, Jinghan & Xie, Yuxin, 2023. "Prosumer standby fee design: Solving the inequity problem of China's county-wide photovoltaic project promotion," Renewable Energy, Elsevier, vol. 207(C), pages 309-320.
    2. Chen, Ting & Vandendriessche, Frederik, 2023. "Evolution of the EU legal framework for promoting RES-E: A market compatible paradigm shift?," Utilities Policy, Elsevier, vol. 83(C).
    3. Presley K. Wesseh & Yuqing Zhong & Chin Hui Hao, 2023. "Electricity Supply Unreliability and Technical Efficiency: Evidence from Listed Chinese Manufacturing Companies," Energies, MDPI, vol. 16(7), pages 1-14, April.
    4. Sebastian Schreck & Robin Sudhoff & Sebastian Thiem & Stefan Niessen, 2022. "On the Importance of Grid Tariff Designs in Local Energy Markets," Energies, MDPI, vol. 15(17), pages 1-25, August.

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