Impact of network charge design in an energy system with large penetration of renewables and high prosumer shares

Abstract

The transformation of our energy system toward zero net CO2 emissions correlates with a stronger use of low energy density renewable energy sources (RES), such as photovoltaic (PV) energy. As a source of flexibility, distributed PV systems, in particular, are oftentimes installed in combination with battery storage systems. These storage systems are dispatchable, i.e., controllable by the operating owners, who can thereby take over an active market role as energy prosumers. The particular battery operation modes are based on the individual prosumer decisions, which, in turn, are strongly affected by the regulatory framework in place. Regulatory frameworks differ from country to country, but almost all regulatory frameworks feature a network charge mechanism, which allocates network infrastructure and operating costs to the end customers. This raises the question of the extent to which different network charges lead to different prosumer decisions, i.e., battery operation modes, and thus different energy system configurations (system costs). In order to evaluate this question we apply (a) a fundamental linear optimization model of the energy wholesale market, which we stringently link to (b) an analysis of peak-coincident network capacity utilization as well as (c) an evaluation of the complete costs of energy for prosumers and consumers. This stringent cycle of analysis is applied to two prototypical network allocation schemes. We demonstrate that network allocation schemes that are orientated to peak-coincident network capacity utilization could both better incentivize a distribution network-oriented behaviour and better share financial burdens between prosuming and purely consuming households than would be the case for volumetric network charge designs. This paper further demonstrates that network-oriented battery operation does not, per se, result in optimal RES integration at the wholesale market level and CO2 emissions reduction. To identify effects from increasing sector integration, an analysis is both performed for a setting without and with consideration of widespread e-mobility. As a broader conclusion, our results demonstrate that future regulatory frameworks should have a stronger focus on prosumer integration by means, among other things, of an adequate network charge design reflecting the increasingly distributed nature of our future energy system.