CEER Paper on Electricity Distribution Tariffs Supporting the Energy Transition
20 April 2020
Today, CEER publishes its Paper on Electricity Distribution Tariffs Supporting the Energy Transition. With this paper, CEER aims to aid national regulatory authorities (NRAs), Distribution system operators (DSOs) and stakeholders in their thinking on electricity distribution tariff design.
DSOs are responsible for operating and investing in the distribution networks, in order to transport electricity to and from their network users. DSOs charge distribution tariffs to network users in order to recover the amount of allowed/target revenues set by the NRA.
The need to re-think the tariff design emerges from the energy transition, given the important trends of digitalisation, decarbonisation and decentralisation. In addition, EU Regulation 2019/943 from the Clean Energy Package also provides requisites for distribution tariffs.
Some of the conclusions outlined in the CEER paper are:
- There is not a one-size-fits-all tariff model that is appropriate for all Member States when it comes to distribution tariffs.
- In order to have cost-reflective tariffs, it is important to be aware of the cost structure of distribution networks in the short term (losses and congestion costs) and over the long term (infrastructure costs).
- The tariff structure of one or various components can be further differentiated, such as by time (static or dynamic), location and interruptibility.
- Advanced differentiation in time and location will most likely increase how cost reflective tariffs are and potentially incentivise beneficial network behaviour but more advanced differentiation is complex and can have a negative impact on other goals.
- The procurement of flexibility and dynamic tariffs can both incentivise network-beneficial customer behaviour but must be carefully considered if applied simultaneously.
- NRAs should consider if increased decentralised generation requires the introduction or increase of tariffs for production, without the network charges discriminating between production connected at the transmission and distribution level.
- Smart distribution tariffs should strike an adequate balance between reflecting the cost drivers of distribution networks and ensuring that network users equipped with smart technologies are able to react to the signals.
- Distribution tariffs applied to customers with energy storage facilities should reflect the use of the network in terms of both energy withdrawal and injection, while any double charging for storage facilities should be avoided.
- CEER emphasises the need for NRAs to review the current tariff structures to identify how they can be improved, for example, to create stronger incentives for efficient usage of the grid or to take into account EV charging.
Please read the full paper here.