Assessing the impacts of retail tariff design on the electric power sector : a case study on the ComEd Service Territory in Illinois
Author(s)Lee, Nelson,S.M.(Nelson S.)Massachusetts Institute of Technology.
Massachusetts Institute of Technology. Institute for Data, Systems, and Society.
Technology and Policy Program.
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Cost-reflective electricity tariffs hold the key to enabling a wider adoption of distributed energy resources. Standard residential electricity tariffs have a flat monthly charge and a static volumetric energy charge that do not provide the correct economic signals to customers and do not reflect the costs of maintaining and operating the grid. Besides subsidies or specific supports to certain technologies, there are currently limited economic incentives for customers to invest in numerous technology options, like home batteries and AC controls, that could collectively and in response to efficient price signals: reduce system peak load, reduce greenhouse gas emission, provide greater system reliability, and reduce system costs. This thesis qualitatively explores the cost drivers of the electricity system and their implications for residential tariff design, as well as the economic inefficiencies and cross subsides that are present under the current volumetric rate tariff.In addition, we quantitatively assess the impacts of different electricity tariffs on consumers and on distributed energy resource adoption. Based on hourly electricity meter data for 54,412 users in the Chicago area, the EIA 2016 residential energy survey, and the Commonwealth Edison's (ComEd's) costs of service reports, this thesis creates a full picture of residential energy consumption and costs. A regression-based Electric Load Decomposition (ELD) model was developed to predict hourly load profiles for each user's air-conditioning usage, electric heating usage and electric hot water heating usage. In addition, the MIT Demand Response and Distributed Resource Economics (DRE) model was used to evaluate the impacts of different electricity tariffs on customer bill changes, adoption of distributed energy resources, and reduction of CO₂ emissions.In this work, we design twelve revenue-neutral tariffs which recover the same total amount of revenues as ComEd's default volumetric tariff. We then compare these tariffs to the current utility volumetric tariff for all 54,412 residential electricity accounts, and we assess the impacts of flat volumetric charges, Time of Use Pricing, Critical Peak Pricing, Coincident Peak Capacity Charges, Real Time Pricing, and Carbon Pricing on customer bills and other metrics of interest. In addition, we also model the adoption of several distributed energy resources in response to these different tariff scenarios in order to understand their economic viability. This work identifies the main tariff features that have meaningful impact on electricity bills, energy usage and CO₂ emissions. Recovering network costs through a tariff that relies on a large capacity charge creates substantial bill changes compared to the default flat tariff.Alternatively, a tariff that has a combination of a flat volumetric rate and a real-time price creates minimal bill impacts. Additionally, we find that most of the tariffs tested in this work incentivize the adoption of smart thermostats for air conditioning and for electric hot water heater. However, in the case of electric space heating, none of the tariffs produced significant incentives to load shift by preheating the building, therefore smart thermostats for electric space heating were rarely adopted. The value created by residential batteries and solar panels are never enough to offset their high (unsubsidized) upfront costs. Furthermore, we find that tariffs that rely on large capacity charges to recover significant portions of network costs, also create favorable prices during the winter that allow electric heat pumps to have lower annual operational costs than natural gas furnaces.Finally, we find that although precooling or preheating of a building (to avoid high price periods) lowers the electricity costs associated to space conditioning, they also result in increased energy consumption and increased carbon dioxide emissions. On the other hand, the scheduling and operating of smart electric hot water heaters can reduce emissions.
Thesis: S.M. in Technology and Policy, Massachusetts Institute of Technology, School of Engineering, Institute for Data, Systems, and Society, 2019Cataloged from PDF version of thesis.Includes bibliographical references (pages 108-111).
DepartmentMassachusetts Institute of Technology. Institute for Data, Systems, and Society; Technology and Policy Program
Massachusetts Institute of Technology
Institute for Data, Systems, and Society., Technology and Policy Program.