FSR Global | Policy Brief
Dynamic retail electricity tariffs : choices and barriers
21 April 2020
AUTHOR: Pradyumna Bhagwat, HADUSH Samson Yemane
Highlights: • Sixteen international case studies on the implementation of dynamic retail electricity tariffs are reviewed to identify the design and implementation choices that have to be made when introducing such tariffs. • Two primary design choices are identified: 1) the time block length, which means the number of distinct tariff levels; and 2) the price periodicity, which is the time interval between revisions of the tariff. Time-of-use tariffs are widely used and they can be the first step in applying dynamic tariffs before moving to more advanced approaches such as real-time pricing. • Two types of implementation choices are identified: 1) those made by the regulator regarding regulatory interventions to protect vulnerable customers; and 2) those made by consumers regarding whether to opt for a dynamic tariff and the selection of a suitable dynamic tariff option. • The implementation of dynamic retail tariffs depends on the availability of physical and information and communication technology (ICT) infrastructure, the maturity of the power market design and consumer behaviour. • Before implementing dynamic tariffs, it is essential to conduct a careful cost-benefit analysis of the effects on consumers, suppliers and the overall implementation system. Moreover, enabling innovative business models and technologies will help to derive the maximum benefit from the application of dynamic tariffs.
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