• Focus Area Electricity Sector Transitions Electricity Sector Transitions
  • Type KAPSARC journal article
  • Date 5 December 2017
Print

Abstract

The growing penetration of distributed energy generation (DEG) is causing major changes in the electricity market. One key concern is that existing tariffs incentivize ‘free riding’ behavior by households, leading to a cycle of rising electricity prices and DEG adoption, thereby eroding utility revenues and start a death spiral. We developed an agent based model using data from two cities in the U.S. to explore this issue. Our model shows worries about a utility ‘death spiral’ due to the adoption of rooftop solar, under current policies and prices in the U.S., are unfounded. We found, consistently for a number of scenarios, that, while the residential segment is impacted more heavily than the non-residential segment, the scale of PV penetration is minimal, in terms of overall demand reduction and subsequent tariff increases. Also, the rate of adoption would probably be smooth rather than sudden, giving the physical grid, the utility companies, and government policies enough time to adapt. Although our results suggest that fears of a utility death spiral from solar systems are premature, regulators should still monitor revenue losses and the distribution of losses from all forms of DEG. The concerns should lead to a more focus on tariff innovations. © 2017 Elsevier Ltd

https://www.sciencedirect.com/science/article/pii/S2214629617302128

Energy Research and Social Science

Authors

Iqbal Adjali

Iqbal Adjali

Former Senior Research Fellow Iqbal is a former KAPSARC senior research fellow who led the Utilities of the Future project that develops decision support tools… Iqbal is a former KAPSARC senior research fellow who led the Utilities of the Future project that develops decision support tools for operational and strategic decision making. He is a Fellow of the Institute of Mathematics and its Applications (IMA), a member of the Institute of Physics (IOP) and a member of the Chartered Institute of Marketing (CIM). Iqbal is also the inventor of several patents.

Patrick Bean

Patrick Bean

Rolando Fuentes

Rolando Fuentes

Former Research Fellow Dr. Rolando Fuentes was a research fellow focusing on business and regulatory models for the Utilities of the Future project.… Dr. Rolando Fuentes was a research fellow focusing on business and regulatory models for the Utilities of the Future project. He has extensive experience in the energy and environmental sectors as an academic and policymaker. Rolando was the director of international negotiations at the Mexican Ministry of Energy and later became director of hydrocarbons projects. Before joining the Mexican government, he was a fellow of the London School of Economics, where he lectured and taught courses in Environmental Impact Assessment and Environmental Policy, and supervised master’s dissertations. Rolando has also been an associate of the Oxford Institute of Energy Studies and IHS Cambridge Energy Research Associates (IHS CERA), and was a recipient of the British Chevenning Scholarship in 2001.  

Frederic Murphy

Frederic Murphy

Visiting Researcher Frederic is professor emeritus, Fox School of Business, Temple University, where he taught for 30 years. He was a visiting… Frederic is professor emeritus, Fox School of Business, Temple University, where he taught for 30 years. He was a visiting researcher fellow at KAPSARC where he is participating in the development of energy models and writing policy analyses in a range of areas, including domestic energy use in Saudi Arabia, market power in world oil markets, designing and managing income stabilization funds, and China's and India's energy economies. He works mainly in the area of energy-market forecasting and energy policy analysis. Prior to joining Temple, he was at the Energy Information Administration (EIA) of the U.S. Department of Energy and its predecessor, the Federal Energy Administration, where he headed the group that did the economic impact analyses of the bills and laws passed during the Carter administration and developed and ran the forecasting models then used for policy analyses and the forecasts in the EIA Annual Report. He has authored over 100 refereed articles. In one study he was ranked in the 20 most published researchers in his field over a fifty-year span. He was the editor in chief of the journal Interfaces, an area editor for Operations Research, and the Informs Journal on computing, and the Vice President of Publications for INFORMS and its predecessor society, Operations Research Society of America. He has been involved in studying local economic policy issues, including advising the Tax Reform Commission of the City of Philadelphia, estimating the impact on jobs of building casinos in Philadelphia, and political redistricting. He also did a queueing study oil tank vessels on the Delaware River.

Steven O. Kimbrough

Steven O. Kimbrough

Mohammed Muaafa

Mohammed Muaafa

Share this Publication

Stay informed

 I'm interested in

Select the updates you'd like to receive from us

About

A bit about you