July 4, 2017
Application Tariffs for Prosumers
Electricity distribution companies have expressed concern about the possible economic losses tied to the growing number of consumer units that generate most of their own energy needs on rooftops or facades (BIPV), making use of otherwise idle space. Consumer units with this characteristic are also known as prosumers.
Setting a correct tariff, whether binomial1 or not, presents itself as a possible solution to avoid such economic losses. It's important to understand that simply adopting any binomial tariff doesn't solve the issue, and if it's not properly calculated, it can even create a new cross-subsidy. Applying a binomial tariff to prosumers, set simply from residential consumer-unit tariffs, would create a cross-subsidy by improperly allocating to prosumers distribution-service costs that aren't their responsibility.
Tariffs are set considering dozens of load profiles, which for low voltage cover residential, rural, commercial, industrial, public-service, and public-lighting consumer units. These dozens of load profiles reported by distribution companies to ANEEL, as a technical choice, result in a single reference tariff2 per voltage level for calculating the application tariff3.
Looking at a load curve for a residential consumer connected at low voltage, we can observe some characteristics regarding how it's metered by the electricity distribution concessionaire. In a scenario where expected generation is, say, 90% of actual consumption, we get the real consumption and generation profiles shown in Figure 1.
It's possible to observe that 40% of the generated energy is self-consumed. The remaining 60% of generated energy will be fed into the distribution system, a curve represented in Figure 1 as Injected Generation.
Figure 1 - Prosumer Profile
Since self-consumption reduces the flow of energy into low-voltage grids, quantifying self-consumption within total observed low-voltage consumption is essential to determining distribution companies' tariff structure and regulatory operating costs.
Under the net-energy compensation system, also known by the English term Net Metering, given the characteristics presented, only 10% of actual consumption would be billed — the curve represented in Figure 1 as Net Metering.
The Metered Consumption curve, shown in Figure 1, indicates the load profile that will be seen by the distribution system. This curve characterizes the load profile of a prosumer unit (an electricity producer and consumer).
If a consumer unit's load profile (prosumer or not) diverges from the average consumption profile for its voltage level, an intra-level cross-subsidy is created among consumer units at that voltage level. The load profile also defines each typical curve's load factor. The higher the load factor, the greater the consumer unit's responsibility in shaping distribution-service costs. While the average load factor observed at low voltage is 55%, prosumer units show load factors around 30%. So a binomial tariff set for a prosumer shouldn't have the same revenue-generating capacity as a binomial tariff calculated for a low-voltage consumer unit's average consumption profile.
Beyond this, we also need to consider the market reduction due to self-consumption, which consequently reduces regulatory operating costs and also changes the vertical structure4 in a way that raises tariffs at voltage levels upstream of the prosumer's connection point. The technical article prepared by TR Soluções describes how setting appropriate tariffs at all voltage levels, factoring into that calculation that the market served by the distribution company also includes prosumers, can eliminate any economic loss feared by electricity distribution agents without penalizing consumer units that have started generating their own energy.
Whenever prosumer units come up, dozens of questions related to this new type of grid user always arise. TR Soluções ran a few simulations seeking to obtain enough data to answer at least the following questions: what is the marginal capacity cost of serving residential prosumer units connected at low voltage?; how do marginal capacity costs by activity (residential, rural, commercial, industrial, public service, public lighting) diverge from the low-voltage average cost?; what electricity-distribution activity costs are avoided when consumer units start generating part of their own energy needs?; what influence does the size of the prosumer market have on tariff calculation?; and, finally, whether adopting a binomial tariff could actually hinder the expansion of photovoltaic distributed generation in Brazil.
To try to answer these questions, TR Soluções prepared a technical article organized as follows: first, we characterized a residential prosumer unit's load profile. That load profile was then incorporated into the tariff calculation carried out as part of the 2016 tariff review of the distribution company Centrais Elétricas de Santa Catarina (Celesc). Next, we analyzed the tariffs initially set for Celesc, and finally recalculated all of the distribution company's economic tariffs factoring in a prosumer-market level of 30% of the residential (B1) market known in 2016.