Distributed rate design: A review of early approaches and practical considerations for value of solar tariffs
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O’Shaughnessy, Eric (ORCID:0000000169280184)↗
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Tariff Considerations for Micro-Grids in Sub-Saharan Africa
This report examines some of the key drivers and considerations policymakers and decision makers face when deciding if and how to regulate electricity tariffs for micro-grids. Presenting a range of tariff options, from mandating some variety of national (uniform) tariff to allowing micro-grid developers and operators to set fully cost-reflective tariffs, it examines various benefits and drawbacks of each. In addition, the report and explores various types of cross-subsidies and other transitional forms of regulation that may offer a regulatory middle ground that can help balance the often competing goals of providing price control on electricity service in the name of social good while still providing a means for investors to ensure high enough returns on their investment to attract the necessary capital financing to the market. Using the REopt tool developed by the U.S. Department of Energy's National Renewable Energy Laboratory to inform their study, the authors modeled a few representative micro-grid systems and the resultant levelized cost of electricity, lending context and scale to the consideration of these tariff questions. This simple analysis provides an estimate of the gap between current tariff regimes and the tariffs that would be necessary for developers to recover costs and attract investment, offering further insight into the potential scale of subsidies or other grants that may be required to enable micro-grid development under current regulatory structures. It explores potential options for addressing this gap while trying to balance This report examines some of the key drivers and considerations policymakers and decision makers face when deciding if and how to regulate electricity tariffs for micro-grids. Presenting a range of tariff options, from mandating some variety of national (uniform) tariff to allowing micro-grid developers and operators to set fully cost-reflective tariffs, it examines various benefits and drawbacks of each. In addition, the report and explores various types of cross-subsidies and other transitional forms of regulation that may offer a regulatory middle ground that can help balance the often competing goals of providing price control on electricity service in the name of social good while still providing a means for investors to ensure high enough returns on their investment to attract the necessary capital financing to the market. Using the REopt tool developed by the U.S. Department of Energy's National Renewable Energy Laboratory to inform their study, the authors modeled a few representative micro-grid systems and the resultant levelized cost of electricity, lending context and scale to the consideration of these tariff questions. This simple analysis provides an estimate of the gap between current tariff regimes and the tariffs that would be necessary for developers to recover costs and attract investment, offering further insight into the potential scale of subsidies or other grants that may be required to enable micro-grid development under current regulatory structures. It explores potential options for addressing this gap while trying to balance stakeholder needs, from subsidized national tariffs to lightly regulated cost-reflective tariffs to more of a compromise approach, such as different standards of regulation based on the size of a micro-grid.takeholder needs, from subsidized national tariffs to lightly regulated cost-reflective tariffs to more of a compromise approach, such as different standards of regulation based on the size of a micro-grid.
29 ENERGY PLANNING, POLICY, AND ECONOMY↗
Market and behavioral barriers to energy efficiency: A preliminary evaluation of the case for tariff financing in California
Consumers regularly forgo purchases of high efficiency appliances that appear to be cost effective at a reasonable rate of return. While some argue that this is a true revelation of preferences for appliance features, this 'efficiency gap' can be largely explained by a combination of market and behavioral failures that reduce consumers ability to evaluate the relative value of appliances and skew preferences toward initial cost savings, undervaluing future reductions in operating costs. These failures and barriers include externalities of energy use, imperfect competition between manufacturers, asymmetric information, bounded rationality, split incentives, and transaction costs (Golove 1996). Recognizing the social benefit of energy conservation, several major methods are used by policymakers to ensure that efficient appliances are purchased: minimum efficiency standards, Energy Star labeling, and rebates and tax credits. There is no single market for energy services; there are hundreds of uses, thousands of intermediaries, and millions of users, and likewise, no single appropriate government intervention (Golove 1996). Complementary approaches must be implemented, considering policy and institutional limitations. In this paper, I first lay out the rationale for government intervention by addressing the market and behavioral failures and barriers that arise in the context of residential energy efficiency. I then consider the ways in which some of these failures and barriers are addressed through major federal programs and state and utility level programs that leverage them, as well as identifying barriers that are not addressed by currently implemented programs. Heterogeneity of consumers, lack of financing options, and split incentives of landlords and tenants contribute significantly to the under-adoption of efficient appliances. To quantify the size of the market most affected by these barriers, I estimate the number of appliances, and in particular the number of outdated appliances, in California rental housing. Appliances in rental housing are on average older than those in owner occupied housing. More importantly, a substantial proportion of very old appliances are in rental housing. Having established that a very old stock of appliances exists in California rental housing, I discuss tariff financing as a policy option to reduce the impact of the remaining market and behavioral barriers. In a tariff financing program, the utility pays the initial cost of an appliance, and is repaid through subsequent utility bills. By eliminating upfront costs, tying repayment to the gas or electric meter, requiring a detailed energy audit, and relying upon utility bill payment history rather than credit score in determining participant eligibility, tariff financing largely overcomes many barriers to energy efficiency. Using California as a case study, I evaluate the feasibility of implementing tariff financing. For water heaters in particular, this appears to be a cost-effective strategy. Tariff financing from utilities is particularly valuable because it improves the ability of low-income renters to lower their utility bills, without burdening landlords with unrecoverable capital costs. To implement tariff financing country-wide, regulations in many states defining private loan-making institutions or the allowable use of public benefit funds may need to be modified. Tariff financing is relatively new and in most locations is only available as a pilot program or has only recently exited pilot phase. This preliminary evaluation suggests that tariff financing is a valuable future addition to the toolkit of policymakers who aim to increase the diffusion of efficient appliances. While regulatory approval is necessary in states that wish to pursue tariff financing, at this point, the major barrier to further implementation appears to be the newness of the financing mechanism.
32 ENERGY CONSERVATION, CONSUMPTION, AND UTILIZATI↗
Optimal Storage Response to Utility Tariff Structures and Potential Use of Capacity Charges
Energy storage is increasingly being deployed in behind-the-meter use cases, partially in response to falling lithium-ion prices and new utility tariff structures. Utilities are grappling with new tariff design in the presence of distributed energy resources (DER), trying to motivate, fairly price the contribution of, and, in some cases, discourage, certain operation of DER. There are opportunities for energy storage under emerging tariff structures, but utility net load management objectives for storage remain unclear. Diverse tariff structures motivate the use of energy storage to provide one or a combination of: energy arbitrage, energy shifting, solar self-consumption, and import shaving. This paper formulates a linear optimization to demonstrate the optimal storage tariff response, examining customer net load metrics under diverse utility tariff structures, such as time-of-use, net metering, feed-in tariffs, zero export tariffs, and demand charges. A key contribution of this paper is the introduction and examination of a capacity charge as mechanism that can both motivate reductions in both peak import, and exports, along with greater load levelling.
behind-the-meter↗
Maximum demand charge rates for commercial and industrial electricity tariffs in the United States
NREL has assembled a list of U.S. retail electricity tariffs and their associated demand charge rates for the Commercial and Industrial sectors. The data was obtained from the Utility Rate Database. Keep the following information in mind when interpreting the data: (1) These data were interpreted and transcribed manually from utility tariff sheets, which are often complex. It is a certainty that these data contain errors, and therefore should only be used as a reference. Actual utility tariff sheets should be consulted if an action requires this type of data. (2) These data only contains tariffs that were entered into the Utility Rate Database. Since not all tariffs are designed in a format that can be entered into the Database, this list is incomplete - it does not contain all tariffs in the United States. (3) These data may have changed since this list was developed (4) Many of the underlying tariffs have additional restrictions or requirements that are not represented here. For example, they may only be available to the agricultural sector or closed to new customers. (5) If there are multiple demand charge elements in a given tariff, the maximum demand charge is the sum of each of the elements at any point in time. Where tiers were present, the highest rate tier was assumed. The value is a maximum for the year, and may be significantly different from demand charge rates at other times in the year. Utility Rate Database: https://openei.org/wiki/Utility_Rate_Database For updated dataset as of May 8, 2026 see https://data.openei.org/submissions/8685
/kW↗
The Impact of Utility Tariff Evolution on Behind-the-Meter PV Adoption
This analysis uses a new method to link the NREL Regional Energy Deployment System (ReEDS) capacity expansion model with the NREL distributed generation market demand model (dGen) to explore the impact that the evolution of retail electricity tariffs can have on the adoption of distributed photovoltaics (DPV). The evolution most notably takes the form of decreased mid-day electricity costs, as low-cost PV reduces the marginal cost of electricity during those hours and the changes are subsequently communicated to electricity consumers through tariffs. We find that even under the low PV prices of the new SunShot targets the financial performance of DPV under evolved tariffs still motivates behind-the-meter adoption, despite significant reduction in the costs of electricity during afternoon periods driven by deployment of cheap utility-scale PV. The amount of DPV in 2050 in these low-cost futures ranged from 206 GW to 263 GW, a 13-fold and 16-fold increase over 2016 adoption levels respectively. From a utility planner's perspective, the representation of tariff evolution has noteworthy impacts on forecasted DPV adoption in scenarios with widespread time-of-use tariffs. Scenarios that projected adoption under a portfolio of time-of-use tariffs, but did not represent the evolution of those tariffs, predicted up to 36 percent more DPV in 2050, compared to scenarios that did not represent that evolution. Lastly, we find that a reduction in DPV deployment resulting from evolved tariffs had a negligible impact on the total generation from PV - both utility-scale and distributed - in the scenarios we examined. Any reduction in DPV generation was replaced with utility-scale PV generation, to arrive at the quantity that makes up the least-cost portfolio.
29 ENERGY PLANNING, POLICY, AND ECONOMY↗
Tariff Structures to Encourage Micro-Grid Deployment in Sub-Saharan Africa: Review and Recent Trends
This article reviews trends for micro-grid tariffs in Sub-Saharan Africa from two perspectives: guidelines for setting tariffs and methods for structuring tariffs. Different approaches are briefly described, and general benefits and drawbacks presented based on recent experiences and available literature. The pace of micro-grid deployment has suffered from a lack of private sector investment, which is often inhibited by unfavorable policies and uncertainty around tariffs. Traditional utility tariffs are too low to allow micro-grid investors to recover their full costs, but a variety of new approaches can be applied to address these challenges. Broad consensus suggests that cost-reflective tariffs are a critical enabler for micro-grid scale-up. Such tariffs can be coupled with subsidies or with hybridized approaches as well as unique new methods of tapping alternative revenue streams to maintain affordability for low-income customers and financial sustainability for micro-grids. There is no one-size-fits-all approach so long as lifetime costs can be recouped.
24 POWER TRANSMISSION AND DISTRIBUTION↗
Electricity and natural gas tariffs at United States wastewater treatment plants
Abstract Wastewater treatment plants (WWTPs) are large electricity and natural gas consumers with untapped potential to recover carbon-neutral biogas and provide energy services for the grid. Techno-economic analysis of emerging energy recovery and management technologies is critical to understanding their commercial viability, but quantifying their energy cost savings potential is stymied by a lack of well curated, nationally representative electricity and natural gas tariff data. We present a dataset of electricity tariffs for the 100 largest WWTPs in the Clean Watershed Needs Survey (CWNS) and natural gas tariffs for the 54 of 100 WWTPs with on-site cogeneration. We manually collected tariffs from each utility’s website and implemented data checks to ensure their validity. The dataset includes facility metadata, electricity tariffs, and natural gas tariffs (where cogeneration is present). Tariffs are current as of November 2021. We provide code for technical validation along with a sample simulation.
29 ENERGY PLANNING, POLICY, AND ECONOMY↗
Impact of Large Scale Energy Efficiency Programs On Consumer Tariffs and Utility Finances in India
Large-scale EE programs would modestly increase tariffs but reduce consumers' electricity bills significantly. However, the primary benefit of EE programs is a significant reduction in power shortages, which might make these programs politically acceptable even if tariffs increase. To increase political support, utilities could pursue programs that would result in minimal tariff increases. This can be achieved in four ways: (a) focus only on low-cost programs (such as replacing electric water heaters with gas water heaters); (b) sell power conserved through the EE program to the market at a price higher than the cost of peak power purchase; (c) focus on programs where a partial utility subsidy of incremental capital cost might work and (d) increase the number of participant consumers by offering a basket of EE programs to fit all consumer subcategories and tariff tiers. Large scale EE programs can result in consistently negative cash flows and significantly erode the utility's overall profitability. In case the utility is facing shortages, the cash flow is very sensitive to the marginal tariff of the unmet demand. This will have an important bearing on the choice of EE programs in Indian states where low-paying rural and agricultural consumers form the majority of the unmet demand. These findings clearly call for a flexible, sustainable solution to the cash-flow management issue. One option is to include a mechanism like FAC in the utility incentive mechanism. Another sustainable solution might be to have the net program cost and revenue loss built into utility's revenue requirement and thus into consumer tariffs up front. However, the latter approach requires institutionalization of EE as a resource. The utility incentive mechanisms would be able to address the utility disincentive of forgone long-run return but have a minor impact on consumer benefits. Fundamentally, providing incentives for EE programs to make them comparable to supply-side investments is a way of moving the electricity sector toward a model focused on providing energy services rather than providing electricity.
29 ENERGY PLANNING, POLICY, AND ECONOMY↗
Valuation-Based Framework for Considering Distributed Generation Photovoltaic Tariff Design: Preprint
While an export tariff is only one element of a larger regulatory framework for distributed generation, we choose to focus on tariff design because of the significant impact this program design component has on the various flows of value among power sector stakeholders. In that context, this paper is organized into a series of steps that can be taken during the design of a DGPV export tariff design. To that end this paper outlines a holistic, high-level approach to the complex undertaking of DGPV tariff design, the crux of which is an iterative cost-benefit analysis process. We propose a multi-step progression that aims to promote transparent, focused, and informed dialogue on CBA study methodologies and assumptions. When studies are completed, the long-run marginal avoided cost of the DGPV program should be compared against the costs imposed on utilities and non-participating customers, recognizing that these can be defined differently depending on program objectives. The results of this comparison can then be weighed against other program objectives to formulate tariff options. Potential changes to tariff structures can be iteratively fed back into established analytical tools to inform further discussions.
14 SOLAR ENERGY↗
Estimating the impact of tariff-driven behind-the-meter storage operation on distribution grid investments
Increasing growth of distributed solar photovoltaics (PV) and electric vehicles (EV) can strain local distribution networks and require costly upgrades. Distributed battery storage, often deployed alongside PV, can be used to mitigate those costs, depending on how batteries are operated. This study evaluates the potential deferral value of distributed battery storage across a range of tariff structures, focusing on the rate structures most commonly available to residential customers today and related variants. Deferrals are evaluated with a least-cost distribution grid expansion optimization model to identify requirements on line reconductoring, transformer upgrades, and voltage regulator installations under each tariff. Results show that TOU rates and net billing tariffs can yield meaningful deferral value, depending on specific tariff structure features. Under the best performing tariff structure tested, storage produced a median annualized deferral value of $7.18 per kW of storage capacity ( kW S ) across all feeders in the sample, though deferral values were considerably larger for feeders with peak loads that coincide with utility system peak, i.e., timing of TOU peak period. In contrast, under an unrestricted TOU design with no restrictions on grid charging or discharging, the median deferral value was $0/ kW S illustrating the critical importance of tariff structure details.
Rodriguez-Garcia, Luis↗
Impacts of U.S. Carbon Tariffs on China’s Foreign Trade and Social Welfare
A recursive multisector dynamic computable general equilibrium (DCGE) model simulates the economic impacts of carbon tariffs, as proposed by the USA, ranging from $\$40/t to $\$60/t CO 2 . We examine a carbon tax and export subsidy as response policies to the U.S. carbon tariff, respectively. The dynamic model shows the possible impacts of these policies on China’s economic structure, carbon emissions, and social welfare from 2020 to 2030. Simulations show that a carbon tariff changes the structure of China’s exports and promotes trade diversion from the USA to other countries and regions. A domestic carbon tax and subsidy policy can dampen the adverse impacts of carbon tariffs on trade. A carbon tax shows an effective impact on increasing clean energy use, decreasing the carbon intensity of output, and reducing carbon emissions. A subsidy on exports to the USA reduces the adverse impact of a carbon tariff on China’s social welfare in the short term.
29 ENERGY PLANNING, POLICY, AND ECONOMY↗
Feed-in Tariffs and Offshore Wind Power Development
This paper will briefly review the evolution and status of various feed‐in‐tariff programs (FITs) throughout Europe and North America. This paper will first outline feed-in tariffs in more detail and provide a summary of their design features, discuss how costs are calculated, address differences and adjustments to prices, highlight legal issues associated with FITs, and highlight some problems that FITs can face. The second part of the paper will give details of a number of FIT programs that have been established with a particular emphasis on those that relate to offshore wind. FITs have enjoyed widespread success in Europe, and by providing a reliable price and thereby leveling the playing field for renewable energy generators, FITs have fostered under‐developed renewable industries. Several European countries have experienced unprecedented growth in generation and industry after the adoption of feed-in tariffs, yet growth in the United States renewable energy sector has been markedly slow. An order by the Federal Energy Regulatory Commission (FERC) in July 2010 appeared to significantly hinder a state’s ability to develop flexible and fairly priced tariffs; however, a subsequent FERC clarification provided a platform for state tariff development based on practical price considerations. Continued federal leadership will be imperative to squarely address the needs of the renewable industry. By providing continued clarity and establishing state autonomy, FERC’s role can evolve to promote growth in this critical market segment. Absent direct guidance from Congress and federal regulatory agencies, this critical energy sector may languish as international markets capitalize on these flexible policies.
17 WIND ENERGY↗
Multiobjective Model of Time-of-Use and Stepwise Power Tariff for Residential Consumers in Regulated Power Markets
Here, time-of-use (TOU) rates and stepwise power tariff (SPT) are important economic levers to motivate residents to shift their electricity usage in response to electricity price. In this paper, a new multiobjective optimal tariff-making model of time-of-use and stepwise power tariff (TOUSPT) is proposed, which combines the complementary characteristics of two power tariffs, for residential energy conservation and peak load shaving. In the proposed approach, the residential demand response with price elasticity in regulated power market is considered to determine the optimum peak-valley TOU tariffs for each stepwise electricity partition. Furthermore, a practical case study is implemented to test the effectiveness of the proposed TOUSPT, and the results demonstrate that TOUSPT can achieve efficient end-use energy saving and also shift load from peak to off-peak periods.
24 POWER TRANSMISSION AND DISTRIBUTION↗
Tariff Setting in the District Heating Sector: Recommendations Based on International Experience
Ukraine’s district heating (DH) system is an essential resource for the country and has the potential to provide efficient, local, and renewable energy to a large share of the population. However, inefficient regulation and management have caused the sector to experience a vicious cycle of financial, operational, and technological problems. Overcoming these challenges and building a sustainable DH system requires comprehensive reforms, which could attract significant investment, improve the quality of services, and increase the efficiency of DH. One of the key elements of a comprehensive reform program should be a comprehensive reform of the tariff system. The purpose of this report is to provide analysis of European models for tariff regulation and recommendations for reforms to Ukraine’s DH tariff system. The report presents several case studies from European countries, followed by analysis of the current tariff system in Ukraine and barriers to effective regulation. Based on these findings, the report proposes actions Ukraine could take to improve the tariff regulatory system and promote a sustainable DH sector.
29 ENERGY PLANNING, POLICY, AND ECONOMY↗
Utility Green Tariff Programs in the U.S.: Overview and Opportunities for Cost Savings
Federal agencies may want to procure renewable energy from an off-site generator. Green tariffs allow large utility customers in traditionally regulated states to procure renewable energy from their utility through a special tariff for energy from a specific renewable energy project, typically through a long-term contract. Some of these green tariffs provide customers with cost savings. The webinar will explain how these tariffs are structured, how to evaluate cost savings potential and what agencies need to consider when examining this purchasing option.
29 ENERGY PLANNING, POLICY, AND ECONOMY↗
The impact of retail electricity tariff evolution on solar photovoltaic deployment
Here, this analysis explores the impact that the evolution of retail electricity tariffs can have on the deployment of solar photovoltaics. It suggests that ignoring the evolution of tariffs resulted in up to a 36% higher prediction of the capacity of distributed PV in 2050, compared to scenarios that represented tariff evolution. Critically, the evolution of tariffs had a negligible impact on the total generation from PV $-$ both utility-scale and distributed $-$ in the scenarios that were examined.
14 SOLAR ENERGY↗
Backup power or bill savings? How electricity tariffs impact residential solar-plus-storage usage in the United States
Adoption of paired solar-plus-storage systems has accelerated in recent years, driven by both the demand for backup power and a desire to manage utility bills. Tradeoffs between those two uses can arise through the reserve setting on the battery storage system, which serves to maintain a minimum state of charge in case of a power interruption. Our paper applies an economic framework to evaluate this tradeoff in terms of changes in bill savings and customer reliability value across reserve levels, considering how those tradeoffs depend on the underlying electricity rate structure and levels. The analysis is based on a representative set of load profiles, solar profiles, tariff designs, and stochastic power interruption events across ten different regions in the United States. We find that the opportunity cost of holding storage capacity in reserve, in terms of foregone bill reductions, outweighs any gains in reliability value from mitigated power interruptions in the majority of customer situations. Higher storage reserve levels increase total customer value only in specific circumstances, such as for customers with inferior reliability (10x average interruptions), with a very high value of lost load ($50/kWh), and with tariff or interconnection rules that disallow grid charging. However, even this result is dampened when considering tariff designs with higher price differentials that increase the opportunity cost of holding storage in reserve (e.g. import/export or time-of-use rates). Allowing grid charging in tariffs essentially eliminates the necessity to hold any storage in reserve in all sensitivity cases explored.
Electric resilience↗