Locational Tariff Structure for Radial Network Fixed Costs in a DER Context

The regulation of Distributed Energy Resources (DERs) has cast doubt on the sustainability of utility infrastructure charging models. The development of feed-in tariffs, net-metering, and network charge rebates for distributed generation (DG) has been questioned because of the cross-subsidies that result between passive consumers and DG investors. Besides DG investors, other new entrants, such as owners of energy storage resources and electrical vehicles, are creating challenges for the regulation of distribution service pricing as a whole. This paper proposes a new approach to dealing with the fixed cost element of service pricing, that enhances economic signaling in the distribution network. We isolate and address the issue from a distribution network point of view, by excluding from our model the random variables associated with the complexity of social, environmental and other externalities. The solution developed is particularly relevant at a time when distribution networks, historically dominated by passive users, struggle to adapt to a dramatic increase in the number of users who are active agents. It considers the principles governing tariff design from the perspective of simplicity, economic signaling, and revenue reconciliation. Results are presented of simulations performed with different arrangements of alternative energy generators and energy storage devices, using an actual feeder from a distribution company in Brazil. An analysis of these results is provided that suggests a combination of locational and time-of-use rates can provide effective economic signals to these new types of system user.