Regulatory Uncertainty and Simulations of Novel Electricity Tariffs for Households: Applications in Germany and Demand Elasticity

We study two policy adjustments to the German electricity market: 1) a dynamic feed-in tariff surcharge based on the level of day-ahead prices, and 2) a dynamic network fee based on the load measured by the distribution network at the upstream connection. We simulate a baseline case for time of use and critical peak pricing tariffs. We then apply the regulatory changes to each baseline case and report on the potential savings that the price differentials could incentivize household customers to achieve. Households' price elasticity of demand is estimated from the literature and applied to the calculation of cost savings in the simulation. In the baseline cases, households could only save between 0.20 €/a and 6.73 €/a. The application of the regulatory changes for dynamic fees increased the incentive and cost savings from Demand Response (DR) by the households by up to 52.94 €/a. Our analysis and results point toward further applied questions with respect to the ability of policy to harness the DR potential of small electricity customers.