Electricity | Other
Cost-reflective network tariffs : experiences with forward looking cost models to design electricity distribution charges
10 July 2020
BY: Leonardo Meeus, GOVAERTS Niels, Tim Schittekatte
To better reflect local grid conditions to consumers, many regulators are reforming their distribution network tariffs. In this literature review, we start by discussing the difference between short-run and long-run marginal pricing for distribution grids. Short-run marginal pricing is first-best but hard to implement in practice. Several authors therefore argue to that it makes sense to signal long-run marginal costs through a forward-looking charge based on a forward looking cost model. After, we compare four implementations of forward looking cost models that are currently being used in Great-Britain. Finally, we discuss the link between cost models and charge design. We formulate two conclusions. First, forward looking cost models are complex both for the regulator and the grid users. Designing cost-reflective distribution tariffs can help, but tariffs are regulatory tools with limitations. Second, we identify a gap in the literature. There is more academic work on charge design than on forward looking cost models.
logo cadmus Read it on Cadmus Download in open access

LATEST FSR PUBLICATIONS

Other
On 14 January 2021, members of the European Parliament’s (EP) committee on Artificial Intelligence in a Digital Age (AIDA) consulted with experts from the European University Institute (EUI) on topics [...]
Book
Natural Gas Price Controls starts with an estimation of the benefits of price liberalisation vs. regulation, based on the evolution of European markets. However, the focus of the book is [...]
Other
European aviation has been confronted with serious capacity challenges and high levels of delay, in particular, during the two years (2018-2019) leading up to the onset of COVID-19. The pandemic [...]
Working Paper
Peer-to-peer and peer-to-X open a new world of transactions in the electricity sector. This world is characterised by the active involvement of new players, both small in size and non-professional [...]
Other
This study seeks to answer a simple question: will we have enough renewable electricity to meet all of the EU's decarbonisation objectives, and, if not, what should be the priorities [...]
Working Paper
This study seeks to answer a simple question: will we have enough renewable electricity to meet all of the EU's decarbonisation objectives, and, if not, what should be the priorities [...]

Join our community

To meet, discuss and learn in the channel that suits you best.

scroll

top