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

Author

Listed:
  • Christine Brandstätt
  • Gert Brunekreeft
  • Nele Friedrichsen

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.

Suggested Citation

  • Christine Brandstätt & Gert Brunekreeft & Nele Friedrichsen, 2011. "Locational signals to reduce network investments in smart distribution grids: what works and what not?," Bremen Energy Working Papers 0007, Bremen Energy Research.
  • Handle: RePEc:bei:00bewp:0007
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    Citations

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    Cited by:

    1. Roques, Fabien & Finon, Dominique, 2017. "Adapting electricity markets to decarbonisation and security of supply objectives: Toward a hybrid regime?," Energy Policy, Elsevier, vol. 105(C), pages 584-596.
    2. repec:eee:appene:v:195:y:2017:i:c:p:382-401 is not listed on IDEAS
    3. 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.
    4. Claire Bergaentzlé, 2013. "From smart technology to smart consumers: for better system reliability and improved market efficiency," Post-Print halshs-01011169, HAL.
    5. Christine Brandstätt & Gert Brunekreeft & Marius Buchmann & Nele Friedrichsen, 2014. "Information Governance in Smart Grids – A Common Information Platform (CIP)," Bremen Energy Working Papers 0018, Bremen Energy Research.
    6. repec:eee:jeborg:v:139:y:2017:i:c:p:106-117 is not listed on IDEAS
    7. repec:eee:juipol:v:50:y:2018:i:c:p:13-25 is not listed on IDEAS
    8. 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.
    9. Nele Friedrichsen, 2015. "Governing smart grids: the case for an independent system operator," European Journal of Law and Economics, Springer, vol. 39(3), pages 553-572, June.
    10. Bjoern Felten & Jessica Raasch & Christoph Weber, 2017. "Photovoltaics and Heat Pumps - Limitations of Local Pricing Mechanisms," EWL Working Papers 1702, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Feb 2017.
    11. Azhar Ul-Haq & Carlo Cecati & Essam A. Al-Ammar, 2016. "Modeling of a Photovoltaic-Powered Electric Vehicle Charging Station with Vehicle-to-Grid Implementation," Energies, MDPI, Open Access Journal, vol. 10(1), pages 1-20, December.

    More about this item

    Keywords

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

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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