Search

This two-part paper addresses the design of retail electricity tariffs for distribution systems with distributed energy resources (DERs). Part I presents a framework to optimize an ex-ante two-part tariff for a regulated monopolistic retailer who faces stochastic wholesale prices on the one hand and stochastic demand on the other. In Part II, the integration of DERs is addressed by analyzing their endogenous effect on the optimal two-part tariff and the induced welfare gains. Two DER integration models are considered: (i) a decentralized model involving behind-the-meter DERs in a net metering setting, and (ii) a centralized model involving DERs integrated by the retailer. It is shown that DERs integrated under either model can achieve the same social welfare and the net-metering tariff structure is optimal. The retail prices under both integration models are equal and reflect the expected wholesale prices. The connection charges differ and are affected by the retailer's fixed costs as well as the statistical dependencies between wholesale prices and behind-the-meter DERs. In particular, the connection charge of the decentralized model is generally higher than that of the centralized model. An empirical analysis is presented to estimate the impact of DER on welfare distribution and inter-class cross-subsidies using real price and demand data and simulations. The analysis shows that, with the prevailing retail pricing and net-metering, consumer welfare decreases with the level of DER integration. Issues of cross-subsidy and practical drawbacks of decentralized integration are also discussed., Comment: 11 pages, 3 figures

This two-part paper addresses the design of retail electricity tariffs for distribution systems with distributed energy resources such as solar power and storage. In particular, the optimal design of dynamic two-part tariffs for a regulated monopolistic retailer is considered, where the retailer faces exogenous wholesale electricity prices and fixed costs on the one hand and stochastic demands with inter-temporal price dependencies on the other. Part I presents a general framework and analysis for revenue adequate retail tariffs with advanced notification, dynamic prices and uniform connection charges. It is shown that the optimal two-part tariff consists of a dynamic price that may not match the expected wholesale price and a connection charge that distributes uniformly among all customers the retailer's fixed costs and a price-volume risk premium. A sufficient condition for the optimality of the derived two-part tariff among the class of arbitrary ex-ante tariffs is obtained. Numerical simulations quantify the substantial welfare gains that the optimal two-part tariff may bring compared to the optimal linear tariff (without connection charge). Part II focuses on the impact of two-part tariffs on the integration of distributed energy resources., Comment: 11 pages, 2 figures

The decreasing cost of energy storage technologies coupled with their potential to bring significant benefits to electric power networks have kindled research efforts to design both market and regulatory frameworks to facilitate the efficient construction and operation of such technologies. In this paper, we examine an open access approach to the integration of storage, which enables the complete decoupling of a storage facility's ownership structure from its operation. In particular, we analyze a nodal spot pricing system built on a model of economic dispatch in which storage is centrally dispatched by the independent system operator (ISO) to maximize social welfare. Concomitant with such an approach is the ISO's collection of a merchandising surplus reflecting congestion in storage. We introduce a class of tradable electricity derivatives ---referred to as financial storage rights (FSRs)--- to enable the redistribution of such rents in the form of financial property rights to storage capacity; and establish a generalized simultaneous feasibility test to ensure the ISO's revenue adequacy when allocating such financial property rights to market participants. Several advantages of such an approach to open access storage are discussed. In particular, we illustrate with a stylized example the role of FSRs in synthesizing fully hedged, fixed-price bilateral contracts for energy, when the seller and buyer exhibit differing intertemporal supply and demand characteristics, respectively., Comment: 24 pages