A power-based grid tariff featuring a linearly-increasing cost function can encourage prosumers participating in renewable energy communities to invest more in flexibility, according to new research.
A research team from Technische Universität Wien has explored how grid tariff design affects the flexibility investment decisions of prosumers participating in renewable energy communities.
The paper explains that while renewable energy communities offer flexibility potential, current grid tariff design disincentivises grid-friendly behaviours with almost all grid tariff designs in countries that host renewable energy communities offering no incentives to invest in flexibility and reduce peak load.
The research team developed a tailored linear optimization model that explored the case of a prosumer who owns a PV system and invests in a battery storage system and participates in one or multiple renewable energy communities by analyzing different grid tariff designs from 2023 to 2040. The tariff designs were analyzed using Austria, the first EU country to implement participation in multiple renewable energy communities, as the case study.
“In Austria, renewable energy communities receive an economic advantage through reduced grid tariffs to promote participation, but the current design does not incentivize flexibility investment or grid-serving behavior,” the paper explains. “Current electricity billing is based on volumetric consumption, leading to a misalignment of incentives.”
A total of five different grid tariffs were analyzed, two of which represented the current grid tariffs in Austria, with and without reduced energy component costs. The additional three tariff designs include a power component to incentivize peak load reduction, differing in their cost-function formulation.
Helen Anais Fischer, corresponding author of the research, told pv magazine a key takeaway from the research was that grid tariff design is the decisive factor determining whether renewable energy communities support or burden the electricity grid. “The community structure alone does not guarantee grid-friendly outcomes,” she explained.
Fischer added that today’s volumetric grid tariffs, which reduce the price per kilowatt-hour for community members, do not sufficiently incentivize peak demand reduction or investment in flexibility technologies, such as battery storage systems. “Under multiple community participation they can even increase peak frequencies,” she said.
The research found that combining a power-based grid tariff featuring a linearly-increasing cost function with participation in multiple renewable energy communities increases flexibility reinvestment by around 51 % and reduces maximum peak load by up to 65 %.
“This tariff design provides clear incentives for peak load reduction and encourages greater investment in flexibility than the volumetric tariffs commonly used today,” Fischer explained.
Fischer added that while Austria was chosen as the case study for the research, the findings are relevant across the EU.
“Allowing participation in multiple renewable energy communities increases energy trading opportunities and can generate additional revenues. However, the Austrian case shows that these benefits alone do not guarantee grid-friendly outcomes,” Fischer told pv magazine.
“Despite offering a reduced energy component for community members, the current volumetric grid tariff does not sufficiently incentivize flexibility investments or peak demand reduction. Countries introducing renewable energy communities should therefore combine multiple-community participation with a power-based grid tariff, ensuring that the economic incentives for prosumers align with the technical needs of the grid.”
Additional analysis from the research paper says the introduction of a capacity tariff in Flanders, Belgium, shows that implementation of power-grid tariffs is feasible but warns that the shape of the cost function introduces additional complexity.
“A flat power component is readily interpretable, whereas a linear cost function requires prosumers to understand a continuously increasing cost structure, which may reduce transparency,” the researchers wrote in the paper. “Cost adequacy for the grid operator under the tested tariff designs remains an open question and represents an important direction for further research.”
The paper adds that flexibility reinvestment is constrained by accumulated revenues. “Financial measures that ease this capital constraint, such as investment subsidies or leasing models for battery storage systems, could support sustained flexibility investment alongside the tariff incentive,” it says.
The research findings are presented in the research paper “Impact of grid tariff design and prosumer flexibility investments on peak load reduction – Participation in multiple renewable energy communities,” available in the journal Energy Conversion and Management.
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