Smart Pricing to Reduce Network Investment in Smart Distribution Grids—Experience in Germany

Publisher Summary This chapter focuses on the locational, rather than the time-differentiated dimension of the problem and on the potential this has to increase investment efficiency. The implementation of locational pricing results in socially beneficial investment based on locational coordination of investments. This chapter examines smart pricing as a means to defer distribution network investment. Experience with locational distribution pricing is still scarce, but shows a trend to more flexible pricing structures. In distribution networks, locational differentiation appears in network tariffs if at all. In the future smarter tariffs can be expected to gain further importance. The energy system becomes more flexible with high shares of renewable generation and flexible demand in smart distribution systems. A flexible tariff structure is necessary to exploit the benefits of smart grids. Locational pricing can be in the form of locational network pricing or locational energy pricing. The former includes deep connection charges and locationally differentiated use-of-system charges.

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