Grid Tariffs and Role of Distribution Operators for the Energiewende
In Germany, high growth in decentralized renewable generation combined with the very large number of distribution system operators (~850) raises critical questions about the role of distribution operators, increasing grid costs, and how the charges (tariffs) to recover these costs should be designed and allocated among grid users. Grid tariffs are under particular scrutiny. Proposals to resolve the problem with higher fixed charges are on the table, but this approach raises key concerns, including the cost impact on smaller users, the disincentive it creates for end-use energy efficiency, and that it does little to address the increasing flexibility requirements of the system. With its network partners in Berlin, RAP is exploring grid tariff design and cost allocation alternatives to better support and enhance the Energiewende. In particular, RAP developed approaches that can tap the full economic potential of demand-side efficiency and flexibility, and identified elements of current grid tariff design that actually impede Energiewende objectives.
Netzentgelte in Deutschland: Herausforderung und Handlungsoptionen provides an overview of the impacts of current grid tariff structure in Germany, including tariff exemptions. The impacts include growing regional differentials in tariff levels between urban and rural areas, and between Eastern and Western regions, which have given rise to proposals to increase demand charges or basic/standing charges. RAP examines the impact of such grid tariff modifications on Energiewende objectives, and concludes that they do not work in concert with those objectives. Instead, RAP presents a number of design alternatives drawn from international experience, including recovery of Germany’s grid costs via time-differentiated demand charges (as close to real-time as possible) or dynamic tariffs tied to market energy prices. RAP also concludes that effectively evaluating these and other options for grid tariff design and cost allocation requires improved data transparency. RAP led the analysis for this in-depth paper, commissioned by Agora Energiewende, following stakeholder workshops on these important issues.
The role of distribution operators is also being debated in Germany, with special focus on the manner in which they can and should address local grid congestion, demand and supply imbalances, and related issues. One proposal for a “red-yellow-green” traffic signal approach requires regional and local distribution networks designated as operating within a “yellow zone” to purchase balancing power in order to bring active demand and supply on their distribution network into balance. In this commentary (in German), RAP poses overarching questions to consider in evaluating the requirement for these so-called “flexibility markets” at the distribution grid level. RAP challenges the underlying assumption that such markets would actually produce net economic benefits. Before moving forward with this proposal, RAP suggests that a pilot test of this approach should be undertaken at the transmission network level, accompanied by scientific analysis. Making public the projections and costs associated with renewables curtailment during feed-in peaks on the distribution grid is also worth exploring. To the extent that load management resources are available at lower cost, they should be awarded contracts for flexibility services.
Visit our Making Germany’s “Energiewende” (Energy Transition) a Reality page to learn more about our work in support of the Energiewende. Other Energiewende topics of interest include: