The Evolution of Electricity Retail Markets in a Low Carbon World
| The research focused on analysing the impact of policies aimed at promoting renewable energy on the electricity tariff and the consumers. The key research question was “How should the domestic electricity tariff structure evolve as there is an increasing interaction between supply and demand of electricity through distributed generation like solar rooftop systems?” In this research the focus was to analyse the scenario from an Indian utility (BESCOM) standpoint. The prevalent situation and other possible scenarios were simulated on a quantitative model that was built to incorporate electricity tariffs, solar generation and payback calculations. The revenue impact to the utility and consumer at different consumer tariff levels and Feed in Tariff (FiT)s were analysed along with calculations for capital cost and payback. The results indicated that with existing FiT for a 1kWp solar Photo Voltaic (PV) system the utility would make a significant loss of nearly 70% on energy sales alone for energy consumption of 50kWh. The utility only made a profit if the consumption was higher than 250kWh/month which represented only 16% of the utility consumer base. Likewise consumers had a net positive return on bills every month on an average after installation of solar PV. A variance of 15%-50% was seen on consumer returns if the solar PV performance dropped by 2%. A FiT that correlates with individual consumption was proposed as an alternative to minimise the impact on utility. The utility loss was reduced by 50% with the proposal without significant impact on system payback. The key issue with the current policy and its implication traced back to the inherent flaw in the existing retail electricity tariffs as it doesn’t link up with wholesale electricity prices. The final conclusion was that in the prevalent scenario the under recovery of costs by the utility could lead to increase in electricity tariffs thereby impacting non solar PV adopters which undermined the long-term viability as there could be trade-offs between the economic, social and environmental principles of sustainability. Also, based on similar case studies reviewed as part of the research it was concluded that the current policies and retail tariff structures for the utility under consideration had to be restructured to ensure that renewable energy development is sustainable for all stakeholders. |
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