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Centre for Energy Business and Economics Research

Faculty of Economics and Business
Centre for Energy Business and Economics Research
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Machiel Mulder, Stijn Neuteleers and Frank Hindriks deliberate the fairness of dynamic grid tariffs in their new publication: Assessing fairness of dynamic grid tariffs

Datum:05 juni 2017
The increase in the supply of intermittent renewable energy and the higher electricity use lead to stronger variation in network usage, which either requires costly network extensions or the implementation of incentives to reduce peaks.

In their paper, Mulder, Neuteleers and Hindriks focus namely on dynamic tariffs. Furthermore, authors seek to assess the fairness of dynamic tariffs through a combination of theoretical and empirical research. Fairness is defined broader than inequality; it is understood more objectively than just people's perceptions and thus requires engagement with ethical theory; and the fairness analysis is not only based on abstract ethical reflection but also on analysing the underlying arguments for people's perceptions.

The paper finds that both the theoretical fairness assessment and the survey among Dutch households reveal that dynamic tariffs are less fair than transport and capacity tariffs and fairer than Ramsey pricing. The fairness of dynamic tariffs depends on implementation conditions such as: clear, non-economic arguments as justification, guarantying basic-needs fulfilment, decreasing perception that ‘peak use is only for the rich’, and increasing predictability.

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