Grid tariff designs coping with the challenges of electrification and their socio-economic impacts

TL;DR

This paper analyzes various grid tariff designs considering socio-economic impacts, proposing a time-dependent threshold and peak tariff to fairly distribute costs and benefit lower-income households in Denmark.

Contribution

It introduces a novel tariff design combining time-dependent thresholds and peak tariffs, evaluated through a comprehensive case study with detailed socio-economic segmentation.

Findings

Reduced expenses for lower-income groups

Fairer distribution of grid cost burdens

Positive socio-economic impacts observed

Abstract

This paper investigates volumetric grid tariff designs under consideration of different pricing mechanisms and resulting cost allocation across socio-techno-economic consumer categories. In a case study of 1.56 million Danish households divided into 90 socio-techno-economic categories, we compare three alternative grid tariffs and investigate their impact on annual electricity bills. The results of our design consisting of a time-dependent threshold penalizing individual peak consumption and a system peak tariff show (a) a range of different allocations that distribute the burden of additional grid costs across both technologies and (b) strong positive outcomes, including reduced expenses for lower-income groups and smaller households.