A Generic Economic Framework for Electric Rate Design with Prosumers

Abstract

Location-varying electric rates may incentivize distributed energy resources (DERs) with lower system costs. However, the distributional impact among prosumers versus traditional consumers is not clear. This study presents a generic economic framework for evaluating novel rate designs. The study derives conditions under which large solar systems impose a higher marginal cost on the grid and examines the implication of different rate designs for cross-subsidy. Our findings suggest that location-varying rates remove all cross-subsidy effects except in the case where returns to scale in electricity production are low. In addition, location-varying rates lower the electricity bill of prosumers and consumers. Location-varying rates may better incentivize DER adoption in locations that minimize system-level costs.

Department(s)

Economics

Second Department

Engineering Management and Systems Engineering

Research Center/Lab(s)

Center for Research in Energy and Environment (CREE)

Keywords and Phrases

Rate design; Location-varying rates; Distributed energy resources; Photovoltaics; Cross-subsidy; Prosumers

International Standard Serial Number (ISSN)

0038-092X

Document Type

Article - Journal

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2020 International Solar Energy Society (ISES), All rights reserved.

Publication Date

15 Nov 2020

Link to Full Text

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