OverviewReducing carbon footprint due to sustainability concerns has motivated energy efficiency and replacing fossil fuelbasedgeneration for renewable energy sources, some as distributed decentralized units (D-RES). This decentralizedenergy generation creates a new paradigm in the electricity grid, that of a conventional energy consumer turnedproducer (a “prosumerâ€). Prosumers require an enabler to provide energy use locally and remove unnecessaryenergy trading with a remote central point. This can be accomplished through forming “microgridsâ€, which providethe physical infrastructure as well as information exchange platform to control such a system. Microgrids aresometimes managed via an “energy cooperativeâ€, which is a decentralized, democratic coordination method,examples of which exist in Germany (Yildiz et al. 2015).Energy cooperatives require new tariffs designs for pricing their electricity use. Traditional tariff designs assumepassive consumers as end-users, but this assumption does not hold for cooperatives with D-RES volumes. Thus, theyrequire a new tariff design to match electricity supply and demand (Picciariello et al. 2015). Particularly,conventional tariffs designed for passive consumers can cause cross-subsidization, i.e. the subsidizing of electricityuse by one group of consumers for another group. In the case of high distributed solar PV generation, there isalready evidence from California, US, and New South Wales, Australia, that cross-subsidization probably happensfrom high-income to low-income households (Borenstein 2015; Simshauser 2016). These studies looked at crosssubsidizationunder net metering, where consumption and generation is metered as one connection. However, insome jurisdictions generation and consumption are metered and accounted separately. We investigate crosssubsidizationamounts in such scenarios.We investigate cross-subsidization in an energy cooperative developed from household data from Austin, Texas,US. We assume that all cooperative households have a PV panel and their energy generation and consumption ismetered separately. We first calculate cross-subsidization under a conventional tariff, drawn from a localmunicipality utility. We next find cross-subsidization values if the tariff were to match actual electricity costs. Ourresults show that current tariffs create massive amounts of cross-subsidization, which are probably by-products ofthe energy efficiency policy baked into the conventional tariff’s design. However, additional cross-subsidizationexists, which can be reduced with new tariffs based on hourly metering.MethodsWe use data from the Pecan Street Dataport1 for the full year of 2016. 150 households contained usable data for thisstudy and were all utilized. These households have separate metering and accounting for PV panel generation andconsumption. Electricity costs generally consist of energy costs, capacity costs, and other miscellaneous costs. We assume that thelatter depends only on the number of households connected and thus does not depend on tariff design. Currently,these households can be subscribed to Austin Energy’s residential tariff. This tariff is a volumetric tariff based solely on monthly energy use designed to promote frugal energy consumption. There is also a separate Value-of-Solarcredit for solar PV panel owners. To compare, we design a set of additional tariffs that price electricity not onlybased on energy use, but also capacity use (Table 1). Energy costs were based on ERCOT real-time locationalmarginal prices (RTLMP) 3. Capacity costs are assumed as that of a commercial entity of similar size4. Lastly, wedefine cross-subsidizaton for each household as the ratio between electricity costs per annum for a given tariff (ctariff)and the actual electricity delivery costs (creal): ğ¶ = ğ‘ğ‘¡ğ‘ğ‘Ÿğ‘–ğ‘“𑓠− ğ‘ğ‘Ÿğ‘’ğ‘ğ‘™/ğ‘ğ‘Ÿğ‘’ğ‘ğ‘™The same calculations are also done separately for electricity generation as credits per annum. All tariffs are calibratedto be revenue-neutral.ResultsWe find that there is significant cross-subsidization under theconventional tariff. This is mainly as a result of volumetrictariffing based solely on electricity use, designed to discourageexcess consumption. Compared to a flat rate with similarrevenue, this tariff creates heavy cross-subsidization (Figure 1,top). However, this is often from high energy users to lightenergy users. Thus, such cross-subsidization is not the maindiscussion topic here.Next, we compare cross-subsidization between the flat-rate,TOU, and RTP tariffs. For consumption, the TOU tariffgreatly reduces the cross-subsidization already and there isminimal gains from implementing an RTP tariff (Figure 1,middle). However, for generation, credits change drasticallybetween the TOU tariff and RTP tariff (Figure 1, bottom).This is because the TOU tariff contains two tiers, one of whichis the only one used by generation, which is only active atdaytime. Hence, it appears as a flat-rate tariff for generation.ConclusionsReducing the cross-subsidization of a flat-rate tariff requiresupdating metering and accounting from a monthly period to anhourly period, and also separating capacity costs from energycosts. The Cross-subsidization can be mostly mitigated withan RTP tariff. Cross-subsidization amounts are also muchlower than previously found in net metering scenarios(Simshauser 2016; Borenstein 2015).
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