Interaction of DSO and local energy systems through network tariffs

One crucial factor that influences distributed energy resource investments and operation is the grid tariffs. If the price signal passed on to the consumer is not representative of the actual impact of the decentralized decisions on the power system, we may get inefficiencies. The main problem considered in this research is the interaction of a network operator and consumers to study how grid tariffs should be designed to facilitate favorable decentralized decisions. An equilibrium model based on tariffs is developed and benchmarked against a system optimization to study the effect of capacity-based and volumetric grid tariffs when the grid costs are a function of the decentralized decisions. The results show that both a volumetric and capacity-based tariff scheme provides a suboptimal outcome compared to the system optimal solution. Suboptimal decentralized decisions in the perspective of the overall power system is a result of the tariff schemes not being able to represent the actual network costs. Based on the findings, more innovative tariff schemes or related market mechanisms are needed to facilitate decentralized decisions that are aligned with the costs and benefits for the overall power system.