A blueprint for capturing grid value in a decentralized electricity sector

© 2021This study addresses the question of how the electricity grid can best be priced, in the context of disruptive technologies, increasing decentralisation of the power sector and new business models. The emergence of business models can affect the design of tariffs, but at the same time, tariff design can trigger new business models as they can nudge adoption towards certain technologies. Network tariffs have traditionally been established using a cost accounting method. Due to its cost structure, network tariffs are second best constructs, as marginal cost pricing does not lead to cost recovery. Second best solutions, in all probability, will overcompensate some inputs which in turn will be overused (the Averch-Johnson effect). New distributed energy technologies that perform better in these overcompensated inputs will therefore see a higher penetration in the market. Penetration of some technologies over others in a previously monolithic vertically integrated power sector will open up new customer needs and therefore business opportunities. Each resulting business opportunity would make use of the grid differently from which it was originally conceived, and at one extreme, they can bypass it altogether. We provide a framework of analysis that leads to the pricing of the services provided by the electricity grid for each new business opportunity.

A blueprint for capturing grid value in a decentralized electricity sector Academic Article in Scopus