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Zeitschrift für Energiewirtschaft

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15-01-2021

Getting Prices for Prosumers Right? Incentivizing Investment and Operation of Small-scale PV-Battery Storage Systems Through Prices, Charges and Levies

Authors: Jessica Thomsen, Christoph Weber

Published in: Zeitschrift für Energiewirtschaft | Issue 1/2021

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Abstract

We assess how the design of retail prices, grid fees and levies for household prosumers affects the attractiveness and resulting operation of small-scale photovoltaic battery storage systems (PVBSS), using a detailed modeling approach applied to a case study of six households in Germany. The selected pricing schemes and reform proposals are evaluated regarding the investment attractiveness for the prosumer and the impact on system-oriented operation, considering both market and grid integration. We show that the current business models for PV and PVBSS are only exist because they are based on avoiding the need to purchase electricity from the grid and thus avoiding paying taxes and levies on consumed electricity. Introducing time-variable pricing schemes or price components increase the value of PVBSS for the customer and the market, but lead to a less grid-friendly operation. It is shown that the term “system-oriented operation” should be defined carefully, since under the analyzed incentives, the two objectives included in system-oriented operation (market and grid integration) do not necessarily go hand in hand, sometimes even contradicting one another. Both the tariff design and the design of single tariff components have a considerable impact on the attractiveness and the resulting system integration of PVBSS and should be evaluated thoroughly to avoid unintended outcomes.

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Obviously, one may also question whether some objectives are well-posed and appropriate. Notably in line with mainstream environmental economics, incentives for renewable investments should not be an objective on its own. It is rather the decrease in greenhouse gas emissions that should be retained as primary objective. Yet this debate is beyond the scope of this paper (cf. e.g. Frondel et al. (2014), van der Ploeg and Withagen (2014) for contributions to that debate). We rather take the formulated objectives as given and are interested in the question to what extent price structure reforms can contribute to attain them.

In view of actual policy making, this is not a realistic scenario. Yet it reflects the assumptions underlying most so-called energy system models (e.g. Saad Hussein 2017; Eggers and Stryi-Hipp 2013; Palzer and Henning 2014; Simoes et al. 2013, 2015; Sgobbi et al. 2016; Di Leo et al. 2015) which are frequently used to advise policy makers on optimal long-term system development. Since such a pricing scheme also is the first-best choice in view of a system-oriented operation in the absence of local congestions, it is retained here as a kind of benchmark scenario.

Or put differently: Investments in pure PV plants are profitable in all scenarios whereas the addition of a battery leads to a loss in profitability. Yet households frequently will rather consider the packaged bundles (such as the PVBSS) than making individual profitability calculations per portfolio element.

Capacity charges can either be imposed on rated capacity or annual peak load. Both has its merits, however, as essentially the installation of the network infrastructure is the cost driver of grid costs, the present case study uses grid costs on contracted capacity. However, capacity charges on peak load can be used to incentivize a certain customer behavior, cf. e.g. Rodríguez Ortega et al. (2008); Hinz et al. (2018); Pérez-Arriaga und Bharatkumar (2014); Brown et al. (2015) for contributions to the discussion.

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Title: Getting Prices for Prosumers Right? Incentivizing Investment and Operation of Small-scale PV-Battery Storage Systems Through Prices, Charges and Levies
Authors: Jessica Thomsen
Christoph Weber
Publication date: 15-01-2021
Publisher: Springer Fachmedien Wiesbaden
Published in: Zeitschrift für Energiewirtschaft / Issue 1/2021
Print ISSN: 0343-5377
Electronic ISSN: 1866-2765
DOI: https://doi.org/10.1007/s12398-020-00295-5

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