How do dynamic electricity tariffs and different grid charge designs interact? - Implications for residential consumers and grid reinforcement requirements

Dynamic electricity retail tariffs and different grid charge designs are discussed as key measures to support renewable energy integration. This article investigates the interplay between both, examining their impact on residential consumers regarding their economic savings and choice of retail tariff and on grid reinforcement requirements in low-voltage grids. We use a model-based approach for determining grid reinforcement requirements combined with an optimization model to assess residential consumer behavior towards different combinations of dynamic electricity retail tariffs and grid charge designs. We explore how these options influence the choice of households in Germany to invest in a home energy management system and to opt for a dynamic electricity retail tariff. Our findings show that with a grid charge design with capacity subscription, the share of households utilizing their flexibility and opting for a dynamic electricity retail tariff can be increased up to 74% (vs. 67% for a volumetric grid charge design). Furthermore, grid reinforcement costs can be reduced with a capacity subscription based grid charge design by 37% in rural low-voltage grids compared to the current grid charge design in Germany. This study offers novel perspectives on the interplay of dynamic electricity retail tariffs and grid charge designs, emphasizing the need for integrated policy approaches that allow residential consumers to benefit from reduced electricity costs while limiting grid reinforcement costs for distribution system operators.