Stimulating the efficiency of the energy infrastructure by DSO tariffs

In this paper, we will study the role of DSO tariffs in promoting the energy efficiency of the energy infrastructure. The key problem with the present energy based tariff structure is that it is not cost-reflective and do not provide incentives for customers to optimize their consumption so that efficiency of the electricity distribution would be improved. Our conclusion is that power based pricing of the electricity distribution is more cost reflective than prevailing energy based pricing, and it incentivizes customers to decrease their peak powers, so that overall efficiency of the electricity distribution is improved. Moreover, this novel tariff structure provides a tool for avoiding the conflict-of-interests in demand response. In addition, tariff scheme meets the requirements of the legislation and regulation, and we have not discovered any major barriers for its implementation.