Designing future-proof electricity distribution network tariffs in the Netherlands

Abstract

With the fast-growing electricity demand, challenges arise affecting the reliability and the quality of the distribution network. The Dutch DSOs could expand the network capacity, but it is not sure if the network can be expanded fast enough. Network expansion will result in higher total consumer costs and if the network expansion rate is too low, the reliability of the distribution network would be highly affected. Currently, the distribution network tariff in the Netherlands for residential consumers is only based on the connection type. Changing the network tariff structure to stimulate demand response is an option to deal with these challenges. The effects of different network tariff structures in the Netherlands are still unknown. This paper investigates the effects of two configurations of a capacity bandwidth tariff and a personal peak charge on the maximum network peak and the expected consumer charge. This is done by using the model of Hennig et al. (2020) that simulates the allocation of flexible demand of consumers under different network tariff structures. To be able to compare the different network tariff structures, the five key regulatory principles are used. Since these regulatory principles are often ill-defined and unclear, we first propose a set of normative criteria which can be used to quantify if a tariff structure adheres to these principles. The results show that all examined network tariff structures significantly reduce the overall network peak. Furthermore, the examined tariff structures are more efficient and cost-reflective than the current fixed tariff. A capacity bandwidth tariff with bandwidths of 2, 4, 8 and 17 kW seems the best option for a future-proof network tariff structure in the Netherlands.