Tariff Regulation of Electricity Grid Operators in a Decarbonizing Energy System

The transition to a clean energy system involves broad changes, such as the rise of renewable generation and the electrification of end-use sectors such as transport and built environment. The energy system is also becoming more decentralised, with large amounts of generation connected to distribution grids and the emergence of prosumers, who both consume and produce electricity.

This thesis investigates the implications of these developments for the tariff regulation of distribution network operators (DNOs). As natural monopolies, DNOs are subject to regulation of both their allowed revenues and the design of tariffs charged to grid users. The central question in this thesis is whether regulation remains fit for purpose in a changing energy system.

To examine this, we first study the comparability of DNOs subject to yardstick competition to assess whether it provides adequate compensation for all individual DNOs. We then evaluate alternative tariff structures in decentralized electricity systems with diverse users, including consumers, producers, and storage operators. Finally, we present evidence from a large-scale field experiment on how households with electric vehicles respond to alternative grid tariffs aimed at reducing peak demand.

We find that the energy transition challenges existing tariff regulation, but specific adjustments can address this. Regional cost differences between DNOs due to the energy transition may compromise yardstick competition, which can be mitigated by adjusting allowed revenues accordingly. Furthermore, current tariffs often fail to encourage efficient capacity use, but redesigning them to reflect capacity expansion costs could promote more efficient grid use.