An Economic analysis of Local Use of System charges for neighbourhood batteries

Should neighbourhood batteries pay discounted “Local Use of System” (LUoS) charges for their use of the electricity grid? This article presents economic arguments. It concludes that a rationale exists for such discounted charges, for the same reason that network charge discounts are justified to avoid network by-pass. Eligibility needs to be carefully defined to maximise the prospect that neighbourhood batteries are charged from distributed (local) solar. We also conclude that if LUoS is applied to neighbourhood batteries, fairness arguments suggest solar sponge tariffs should be offered to residential consumers.