Conclusions from the DEePRED project – distributional impacts of flexible electricity tariffs

Conclusions from the DEePRED project – distributional impacts of flexible electricity tariffs

Dr Timur Yunusov, School of Built Environment, University of Reading
Prof Jacopo Torriti, School of Built Environment, University of Reading

Whilst flexible electricity tariffs, such as Time-of-Use (ToU) and real-time, play an important role in motivating the shift of electricity demand away from the peak period and progressing towards Net Zero, their widespread implementation for residential customers may have an adverse effect on some groups of consumers. The objective of research work within the DEePRED (Distributional Effects of dynamic Pricing for Response Electricity Demand) project is to evaluate the distributional impact of flexible tariffs and identify groups of consumers who might be advantaged or disadvantaged based on by their socio-demographic parameters.

In the GB, the electricity distribution networks and electricity generation plants are traditionally designed to cater for peak demand, which diminishes the utilization and hence cost-effectiveness of the energy system. In addition to increasing the need to reinforce networks, growing peak demand also contributes to rising prices and CO2 emissions associated with the operation of peaking generation plants. Decarbonisation of infrastructures and residential sector, including the uptake of electric vehicles and heat pumps, is likely to increase the system peak demand in the long-term under all Future Energy Scenarios developed by NG ESO (National Grid 2019). The introduction of price-based incentives, like flexible tariffs, can be used to motivate the shift away from peak electricity demand. However, the distributional impacts of these tariffs have not been analysed in detail.

The majority of previous studies on flexible tariffs focus on the extent to which tariffs – especially ToU – cause changes in electricity consumption, including temporary reductions in electricity demand during peak periods and absolute net conservation effects. More recently, the distributional effects of these tariffs on different types of residential consumers have been analysed as it was recognised that changes in tariffs may create advantages to some socio-demographic groups, but also disadvantages to others (Hledik et al., 2017, CEPA 2017, Frontier Economics. (2012)).

The DEePRED methodology, presented here, compares bottom-up (clustering by activites) and top-down (grouping by socio-demographic information) approaches to determine mechanisms that best describe the groups of consumers classed as advantage and disadvantaged from flexible tariffs. Distributional impacts are analysed on the UK Time Use Survey data and the available residential demand profiles from previous innovation projects carried out by the DNOs in GB. Figure 1 shows the impact of applying real-time price tariff on demand profiles from Low Carbon London project.

Figures 2 and 3 demonstrate the difference in the spread of household activities at peak time and non-peak time for households split by income group and clustered by intensity and timing of energy related activities during peak time. Our study compares the distribution of energy intensive activities across different income groups and household compositions. It shows that the presence of children in low income groups is linked to higher peak-time energy use and hence these are more likely to be disadvantaged from the introduction flexible tariffs.

Further detailed results and discussion will be presented in the full paper.

References

Cambridge Economic Policy Associates (CEPA). (2017) “Distributional Impact of Time of Use Tariffs – Final Report.”

Frontier Economics. (2012) “Domestic and SME Tariff Development for the Customer – Led Network Revolution.

Hledik, R., Gorman, W., Irwin, N., Fell, M., Nicolson, M. & Huebner, G. (2017), The Value of TOU Tariffs in Great Britain : Insights for Decisionmakers, Technical Report.

National Grid ESO, Future Energy scenarios, July 2019.