Renewable and Sustainable Energy Reviews 77 (2017) 461–473

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Renewable and Sustainable Energy Reviews

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Network charging and residential tariffs: A case of household photovoltaics MARK

in the United Kingdom
⁎
Wadim Strielkowskia, Dalia Štreimikienėb, , Yuriy Bilanc
a
Energy Policy Research Group, University of Cambridge, 13 Trumpington street, CB2 1AG Cambridge, United Kingdom
b
Lithuanian Energy Institute, Breslaujos 3, Kaunas, Lithuania
c
Microeconomics Department, Faculty of Economics Science and Management, University of Szczecin, ul. Mickiewicza 64, 71-101 Szczecin, Poland

A R T I C L E I N F O A BS T RAC T

JEL Classification: Currently, about one million households in the United Kingdom (UK) have installed solar photovoltaic (PV)
Q41 panels with about two-thirds of them are using the panels for self-generating power. According to the UK
Q42 Department of Energy & Climate Change, solar PV deployment in the UK (measured in megawatt) has grown
Q48 considerably (from 95 MW in 2010 when the feed-in tariff was introduced to 11,429 MW in 2016). The
L50
popularity of the solar PV among the UK households made the government to introduce major changes to the
L94
scheme.
Keywords: Our paper focuses on the two major questions: Could it be that the system already favours richer consumers
Distributed generation
or certain types of network user who do not bear either the efficient or fair share of the total system distribution
Electricity prices
(and transmission) costs? Does the apportionment of charges between fixed, per kW peak and per kWh use of
Solar photovoltaic
Demand tariffs system charges need to be changed to be more cost reflective?
We employ the data from the smart meters readings provided by the Customer-Led Network Revolution
monitoring trial conducted with the 199 households in the Northern England that provides the data for the
household electricity use and tariff behaviour between October 2012 and July 2014.
Our analysis demonstrates that, similar to other studies conducted around the world, the increase in the solar
PV resulted in a transfer of wealth and costs between customer groups. Due to their own production, UK solar
PV consumers yield a lower share of the per kWh costs of the distribution system which leads to the increase of
per unit charges as well as the changes in the distribution of their payment between different types of
households.

1. Introduction other countries, the UK government initiated subsidies for households

In 2008, the UK government adopted the 2008 Climate Act and set
up a target for itself to decrease the carbon emissions by 35% in 2020,
and by 80% in 2050. Although UK (alongside with France) is amongst
the most reluctant countries when it comes to the binding renewable
commitments which can be attributed to the regulatory issues and
administrative barriers, it is also one of the most hard-line supporters
of carbon reduction [24]. One of the most useful ways how to achieve
this ambitious goal is the increasingly wider use of distributed renew-
able energy (DRE), in particular domestic solar photovoltaic (PV)
systems. In the UK, similar to many countries, it is done through
generous capital subsidies for households installing solar PV [26,27].
Solar energy occupies the leading position among other renewables
both with regard to its popularity among the general public and with its
broad support by the stakeholders and policy-makers. Similar to many
installing solar photovoltaic systems (solar PV). This has been done
despite the fact that due to its geographical position and its climate, the
use of solar energy in the UK might be not a very practical model in
comparison with, for example, the case of the Masdar city in the
Persian Gulf with its year-round sunlight [25].
1.1. Electricity prices and tariff methods
Electricity service is dealing with the delivery of both power (kW),
energy (kW h) and power quality (e.g. voltage, frequency, or blackouts
and interruptions) in particular geographic locations. Electricity con-
sumers value each of these attributes directly, reveal their preferences
for each attribute and theoretically and technically it seems possible to
charge for each of these dimensions of service. However, it has become
a tradition on electricity markets to offer customers bundled prices.

⁎
Corresponding author.
E-mail addresses: strielkowski@cantab.net (W. Strielkowski), dalia.streimikiene@lei.lt (D. Štreimikienė), yuriy_bilan@yahoo.co.uk (Y. Bilan).

http://dx.doi.org/10.1016/j.rser.2017.04.029
Received 20 July 2016; Received in revised form 10 April 2017; Accepted 17 April 2017
Available online 25 April 2017
1364-0321/ © 2017 Elsevier Ltd. All rights reserved.
W. Strielkowski et al.
From the economic point of view, the welfare Ramsey-Boiteux
pricing suggests that more fixed costs should be recovered from richer
or price-inelastic customers with a trade-off between these two
characteristics, thence it seems that some network charges should be
targeted on generation side to provide correct signals. In doing so, it
would be possible to apportion fixed costs by income, property value,
kW connection capacity or another indicator of income (or ability to
pay, such as possession of an electric vehicle (EV) charging point)
which did not result in electricity market distortions. Among alter-
native network charging principles are, for example: cost reflective
charging, traditional public service pricing, platform market pricing, or
customer-focused business model pricing.
As the renewable energy sources start to gain larger shares of the
traditional electricity markets, the total system costs come down, the
total fixed costs are reduced, and system marginal costs are reduced.
However, the question arises: when the total system costs fall, should it
be the new users or the existing users who benefit from this?
The solution might be in introducing new changes to the existing
tariff methods such as maximum kW export charge, based on the
design rating of the household with PV which both consume and export
their electric energy. Our paper analysis these issues and attempts to
find new arguments and solutions for new charges and tariffs in the
situation with photovoltaics deployment on the traditional electricity
markets.
Currently, UK households are currently paying one of the lowest
retail electricity prices in the EU 15 being well under the EU 15 median
and belonging to the group of the EU countries with the similarly low
electricity prices such as Finland, France or Luxemburg (and far away
from the counties with the highest prices such as Denmark, Belgium
and Germany). According to DECC (2013) [13], wholesale gas and
electricity costs currently make up the largest proportion of an average
household energy bill and constitute around 47% in 2013.
Transmission, distribution and metering costs accounted for 20%,
other supplier costs and margins accounted for 19% and VAT 5%.
In 2013, the average household electricity bill in the UK was £576
(in real 2012 prices and before rebates). Wholesale energy costs were
estimated to make up around 37% of an average household electricity
bill. According to the Customer-Led Network Revolution (CLNR)
project [9], in 2011 suppliers made a margin of around 4% of the
total electricity cost and the distribution charges represented 16% of
the cost of the electricity bill.
In the UK, the load profile (the time of the day and year that
electricity is used) has a strong influence on the price paid per unit of
electricity by the consumers. Those customers who do not use half-
hourly metered data, the exact daily consumption is not known and the
periodic meter readings (typically a few times a year) is recorded and
converted for billing purposes into half-hourly profiles based on
standardised load profiles, or profile classes (see Table 1).
Table 1
Electricity meters, billing type and consumption by profile classes in the UK.
Source: Adapted from [16]
Group Description
Profile Class 1 Domestic Unrestricted Customers
Profile Class 2 Domestic Economy 7 Customers
Profile Class 3 Non-Domestic Unrestricted Customers
Profile Class 4 Non-Domestic Economy 7 Customers
Profile Class 5 Non-Domestic Maximum Demand (MD) Customers with a Peak Load Factor (LF) of less than 20%
Profile Class 6 Non-Domestic Maximum Demand Customers with a Peak Load Factor between 20% and 30%
Profile Class 7 Non-Domestic Maximum Demand Customers with a Peak Load Factor between 30% and 40%
Profile Class 8 Non-Domestic Maximum Demand Customers with a Peak Load Factor over 40%
462
Renewable and Sustainable Energy Reviews 77 (2017) 461–473
About 80% of non-HH users (around 23.5 million UK households)
fall under an “Unrestricted” profile class. A further 18% of non-HH
users are under a “Economy 7″ class and have a two-rate meter that
allows for a cheaper off-peak (and higher daytime) tariff. Moreover,
Table 2 provides a comparison of distribution charges and average
customer bills in the UK for the year 2013.
From the overview of charges and average customer bills, it
becomes apparent that between 7% and 20% of the HH customers’
network costs are recovered in fixed charges while about 80–90% are
recovered in kW h charges.
1.2. UK's household solar PV and FiT
Domestic solar PV technology is playing an important role in the
transition to a low carbon energy network as one of the most affordable
and effective sources of distributed renewable energy generation. The
CLNR [10] study reported that the UK solar PV households annually
generate an amount of electricity equivalent to over 40% of their
annual electricity consumption and that 80% of that electricity is
typically used on site.
UK's generation of renewable energy is fostered by Renewables
Obligation (RO). The RO was initiated in 2002 and it obliges electricity
suppliers to source an increasing percentage of generation from
renewable sources. Electricity generators receive Renewable
Obligation Certificates (ROCs) for the renewable electricity they gen-
erate from Ofgem (the Office of Gas and Electricity Markets).
Both in UK and worldwide, traditional carbon fuel generators have
to set up their prices depending on time and location of generation and
are being separately paid for capacity, energy, and ancillary services,-
renewable energy generators are charging FiTs for the energy they
produce regardless of the system condition or the network constraints
[2].
Feed-in tariff (FIT) programs usually mean long-term contract
under which the utility agrees to purchase the excess generation from
a distributed generation (DG). Following these arrangements, the
utility companies usually come up with a per-kW h purchase price
with the rates varying from utility to utility thus resulting in a lot of
contention. In the long run, the utility company pays the DG in a
similar manner as they would pay a non-utility wholesale power
producer. Under a FIT program, the DG is compensated at the
predetermined rate for their surplus power.
In the UK, FiTs were first introduced in April 2010 to provide a
fixed payment for generation from RES-E plant under 5 MW. The
tariffs can be credited with driving the rapid deployment of PV in the
UK, pushing up installed capacity from almost zero to 2.4 GW by June
2013 (DECC, 2013 [13]).
The majority of UK solar PV installations are concentrated in the
residential and commercial sectors, while small-scale PV systems
General billing type Average annual consumption
Estimated/Prepayment 2000 kW h (low)
3100 kW h (medium)
4600 kW h (high)
Estimated 2500 kW h (low)
4300 kW h (medium)
7200 kW h (high)
Estimated 15,000 kW h
Estimated 25,000 kW h
Estimated 82,000 kW h
Estimated 110,000 kW h
Estimated 130,000 kW h
Estimated 150,000 kW h
W. Strielkowski et al. Renewable and Sustainable Energy Reviews 77 (2017) 461–473

Table 2
Comparison of distribution charges and average customer bills in the UK (2013).
Source: [22].

Variable rate Fixed charge Annual averages

(p/kW h) (p/customer/ Consumption (kW h) Variable costs Fixed costs Total costs % Variable % Fixed
day) (£) (£) (£) costs costs

Electricity North West

Electricity North West 3.038 1.940 3.200 97.22 7.08 104.30 93.2% 6.8%

Northern Powergrid
Northern Powergrid 2.792 4.830 3.200 89.34 17.63 106.97 83.5% 16.5%
(Northeast)
Northern Powergrid 2.263 4.710 3.200 72.42 17.19 89.61 80.8% 19.2%
(Yorkshire)

Scottish Power
Distribution
SP Distribution 2.283 5.040 3.200 73.06 18.40 91.45 79.9% 20.1%
SP Manweb 4.114 3.730 3.200 131.65 13.61 145.26 90.6% 9.4%

SSE Power Distribution

Hydro Electric Power 3.710 6.810 3.200 118.72 24.86 143.58 82.7% 17.3%
Distribution
Electric Power Distribution 2.397 2.950 3.200 76.70 10.77 87.47 87.7% 12.3%

UK Power networks
Eastern Power Networks 2.053 4.310 3.200 65.70 15.73 81.43 80.7% 19.3%
London Power Networks 2.117 3.990 3.200 67.74 14.56 82.31 82.3% 17.7%
South Eastern Power 2.617 3.990 3.200 83.74 14.56 98.31 85.2% 14.8%

Western Power
Distribution
East Midlands 2.266 1.470 3.200 72.51 5.37 77.88 93.1% 6.9%
West Midlands 2.356 2.270 3.200 75.39 8.29 83.68 90.1% 9.9%
South Wales 3.470 2.720 3.200 111.04 9.93 120.97 91.8% 8.2%
South West 3.456 2.950 3.200 110.59 10.77 121.36 91.1% 8.9%

benefit from non-burdening administrative procedures and quick Table 3

installation [14]. The PV market in the UK is governed by two Differences in bill savings and payments from the Feed-in Tariff (FITs) scheme.
mechanisms: Source: Own calculations based on [15].

•
Sunderland Durham York
a generation tariff, or feed-in tariff (FiT) coupled with a feed-in
premium EPC band D or higher E or lower D or higher

• a quota system with tradable certificates (ROCs—Renewable Roof slope

Shading
30°
20% (very little)
70°
60%
50°
> 80%
Obligation Certificates). (significant) (heavy)
Roof direction South North South
The UK solar PV owners can select from the two options - Installation size small medium small
generation tariff and the quota system depending on their PV power: Peak generation in kW 1.5 kWp 2.0 kWp 1.5 kWp
Monthly electricity bill £61 £80 £55

•
Annual payment from £55 (4.32p/ £3 (0.74p/kW h) £27 (4.32p/
PV systems higher than 50 kW are eligible for FiTs;
•
generation tariff kW h) kW h)
PV systems between 50 kW and 5 MW are eligible for both; Annual fuel bill savings £44 £16 £22
• PV systems lower than 5 MW are only eligible for the quota system. Annual payment from
export tariff (4.91p/
£31 £11 £16

Apart from FiT, UK solar PV owners can consume part of the PV
energy produced and sell the excess to the grid. In case the PV system
rated power is lower than 30 kW, the producer receives a bonus
calculated by the amount of electricity fed into the grid (export tariff,
or a feed-in premium above the generation tariff). In case the rated
power is higher than 30 kW, the produced can sell the surplus on the
electricity market at wholesale market price.
Table 3 that follows shows the differences in bill savings and
payments from the Feed-in Tariff (FITs) scheme for selected locations
in Northern England.
It is estimated that over 1 million UK households currently have
solar PV panels with about two-thirds of them using the panels for
generating power [5]. According to the UK Department of Energy &
Climate Change (DECC, 2015) [12], solar PV deployment in the UK
(measured in megawatt) has grown almost ten times (from 95 MW in
2010 when the feed-in tariff was introduced to 8437 MW in 2015). The
kWh)
Total payments and £131 £30 £65
savings
popularity of the solar PV has been growing so fast that the government
is planning major changes to be introduced to the scheme or the
scheme to be suspended altogether in 2016 (Kay, 2015).
2. Literature review: solar PV boom and tariffs
Solar PV is gaining more importance and relevance both in the
developed Western economies and in the developing countries amongst
which many enjoy over 300 days of sunshine and are dependent of
fossil-fuel imports. China and India are becoming big players in the
solar business. It is estimated that in 2015 China dethroned Germany
as the world's biggest producer of solar energy – even though the solar

463
W. Strielkowski et al.
Table 4
Literature review of selected solar PV tariffs-related studies.
Source: Own results based on the review of the literature
Study Type of information
Antonelli and A survey of the PV market in Italy
Desideri [3] (a 2008–2010 FiT scheme):
studying a number of installations
of different sizes whose economic
data were known and assessed.
Direct feedback: statistics
analyses.
Balta-Ozkan et al. Using spatial econometric approach
[4] to find the determinants of the
regional distribution of
photovoltaic deployment in the UK:
the data on PV deployment and FiT
installations as of 30 June 2013.
The database lists installed and
declared capacities (kW) for
different technology and
installation types.
Direct feedback: A variety of
installation capacities listed in
the database.
Bawakyillenuo [6] Analysis of the socio-economic and
political measures that informed
the varied dissemination outcomes
of the technology in Ghana, Kenya
and Zimbabwe through the lens of
the Social Construction of
Technology (SCOT) theory.
Direct feedback: describes the
dissemination and utilization of
solar PV technology in Ghana,
Kenya and Zimbabwe from the
1960s to 2007.
Bobinaite and Direct feedback: a review an
Tarvydas [7] example of renewable technologies
in Lithuania: development of RES
consumption; tendencies of new
investment into the renewable
energy sector; renewable energy
sector financing channels and
instruments worldwide.
[17,18] Direct feedback: describing and
analyzing the relationships between
energy consumption and economic
growth for 12 European countries;
econometrical model of economic
growth with the application of
energy consumption/ electricity
consumption as one of the
Renewable and Sustainable Energy Reviews 77 (2017) 461–473
Overview of main results Comments
Evidence of effects of land availability, The development of the PV market in Italy is led by the following drivers:
solar radiation, regional GDP, and land availability; solar radiation; regional GDP; population; the interest in
population on the PV distribution in the return of the investment (main driver).
the region.
Power plants are mainly built in small The FIT schemes applied in Italy in the last five years produced one of the
and medium sizes in the wealthiest largest stocks of PV plants in the world in the short time. The result is an
regions, with personal investment almost uncontrolled growth until the end of 2012. However, the installation
either by families or by small and of PV plants was more a financial investment than the creation of a
medium enterprises on their rooftops. distributed and widespread consciousness about using renewable energy
Investment in large power plants was sources.
much smaller than in the less wealthy
part. This is explained by the fact that
large power plants were mainly built
by utilities or by national and
international investment funds and
firms. For this kind of investors, the
return of the investment is more
important than the location, and
regions with larger global solar
radiation, availability of land and
lower land costs were privileged.
In the poorest regions, there was a
weaker driving force to personal
investment in small domestic PV
plants on rooftops, and the smaller
number of small and medium
enterprises also affected the
number of medium sized plant.
The substantive drop in the cost of Demand for electricity, population density, pollution levels, education level
solar PV since 2007 coupled with the of households and housing types are among the factors that affect PV uptake
introduction of the Feed-in Tariff in a region. Moreover, the results indicate significant regional spillover
(FiT) scheme in 2010 resulted in a effects on the UK solar energy market.
rapid increase in installation of PV
panels in the UK (from 26.5MWp in
2009 to over 5 GW by the end of
2014).
Proposed critical steps which Ghana As the Kenyan and Zimbabwean success stories revealed, with good returns
needs to undertake to enhance the from income generating activities in rural areas, individuals and families
replication of the Kenyan and without access to the national grid will adopt PV to enhance lighting,
Zimbabwean PV success stories. entertainment, and education of children. The national grid should be de-
Classification of the drivers politicized while PV is promoted, especially in the remotest parts of the
underpinning the different rates of country
PV development and dissemination
in Kenya, Zimbabwe, and Ghana.
Solar collectors in the country could Demonstrated that seeking to expedite solar sector development in Lithuania
compete in the district heating sector would require reviewing a feed-in tariff.
even without state support. Solar collectors for heat energy production are valid in small multifamily
Assessment of impact of financing houses in Lithuania. It is practical to install solar collectors even under
instruments on the costs of solar market conditions – using hard loans provided by banks. Solar collectors
energy and discuss done. could compete in the district heating market without any state support.
Seeking to expedite solar sector
development in Lithuania is
essential to review feed-in tariff,
which currently is too low and
impedes implementation of solar
PV technologies.
Understanding the relationships of There was used the panel data approach to investigate the relationship
energy consumption in relation to the between energy consumption and economic growth. Panel unit root tests
economy is very important task to were applied to test the degree of integration of economic growth and energy
ensure a stable economic consumption and panel least squares method was applied to determine the
development. Future economic significant relationships between energy consumption and GDP. Moreover
growth presupposes the availability of the individual effects of every country were estimated. The studies conclude
increasing quantities of useful energy, that there is a strong relationship between energy consumption and
so energy consumption can be very economic growth and energy consumption can be very helpful by estimating
(continued on next page)
464
W. Strielkowski et al.
Table 4 (continued)
Study Type of information
explanatory variables
Mokri et al. [20] Direct feedback: assessment of the
potential of solar energy as an
essential future energy source in the
oil-rich United Arab Emirates; the
energy and electricity sectors survey
on the base of data statistics (as
well as monthly GHI maps obtained
by processing satellite and ground
measurement data; the solar
installations map for the UAE)
Ondraczek et al. Direct feedback: maps of annual
[23] electricity production (in kWh) of
solar PV installations, and installed
PV capacity per capita over 143
states. The leveled cost of solar PV
electricity in the set of 143
countries.
Renewable and Sustainable Energy Reviews 77 (2017) 461–473
Overview of main results Comments
helpful by estimating economic economic growth.
growth.
Conclusions: it was found that An extensive literature review on the development of solar energy in the UAE
energy consumption in the analyzed for investigating: (i) methods for evaluating the solar resource, (ii) the effect
countriesis not neutral to economic of the local environmental operating conditions on the performance of
growth - Energy Consumption is a different technologies, (iii) strategies for financing projects and encouraging
pro-growth variable, Gross Fixed home-owners to install PV, and (iv) benefits of solar energy to the electricity
Capitalis a pro-growth variable as generation, water production and transportation sectors.
well, the GDP equation excludes
Total Employment. The economic
growth of analyzed European
countries is energy-dependent, so
one can state that energy
consumption is a limiting factor to
economic growth.
Proved the effect of the local
environmentally operating
conditions on the performance of
different technologies, strategies for
financing projects and encouraging
home-owners to install PV. Showed
the benefits of solar energy for the
electricity generation, water
production and transportation
sectors in the sun-abundant
country.
Conclusions: it was found that it Comparison between different methods used for estimating global solar
might be more beneficial to irradiation parameters in the United Arab Emirates.
integrate PV in buildings than in
large plants because building
integrated PV installations improve
the thermal performance of
building sand, therefore, reduce
their cooling (i.e. electricity)
demand, and transmission losses.
In addition, it appears that work is
under way by local authorities to
prepare the local electric grid for
integrating distributed generators
at large scale in the future.
A first attempt at quantifying the A global map of LCOE based on population-weighted national average GHI
overall importance of global and country-specific WACC (reflects an assumption of countries achieving
variations in the cost of finance for the 2011 global average installation costs; an assumption of countries achieving
economics of solar PV, and by late-2011 installation costs found in Germany. The rank ordering of
extension other renewable energy countries remains constant across the two assumed sets of costs.)
technologies. Global maps of difference between LCOE and retail electricity prices,
assuming global average investment costs and German investment costs. The
authors calculated values reflect local values for GHI, WACC and residential
electricity rates.
The adoption of solar photovoltaic
(PV) technologies in the recent
years might have come at an
unnecessarily high price. The
leveled costs of electricity (LCOE) of
solar PV systems in Northern
countries may in fact be lower than
in equatorial countries, and high
latitude countries may thus not
have been an unwise location to
subsidize the adoption of solar PV
technologies. Evidence for the
efforts to expand PV installation in
equatorial developing countries
benefiting from policies designed to
make low cost finance more widely
available which supports the on-
going efforts to “de-risk” low carbon
investments.
1) Developed a global LCOE model
and populate it with input values for
all parameters that are treated
uniformly across the dataset.
2) Calculated the average electricity
yield from a prototypical solar
energy system in each of these
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465
W. Strielkowski et al.
Table 4 (continued)
Study Type of information
Verbruggen and Indirect feedback: renewable
Lauber [31] electricity support instruments
based on solar PV. The performance
of feed-in tariffs (FiT) and tradable
certificates (a thorough literature
review)
Simshauser [29] Direct feedback: reported the
results of the trial that included 6
digital meters installed in 69
broadly representative Queensland
households at the customer
switchboard circuit level separately
measuring half-hour load for
“general power” (e.g. fridge, tumble
dryer, washing machine, etc.), air-
conditioning, electric hot water
systems, household lighting, oven
and solar PV units were described.
A basic proposition to be tested: a
tariff structure dominated by a
flat-rate variable charge will
result in short-use (solar PV)
customers paying too little, and
long-use (non-solar customers)
paying too much.
Van Els et al. [30] Direct feedback: the experience of
using renewables (including the
solar PV) for rural electrification of
the Brazilian Amazon.
Zhang et al. [34] Achievements and problems in
China's wind and solar PV sector
during 2005–2012: a description of
several empirical cases
Yu et al. [33] Direct feedback: the wild price
fluctuations of solar PV Si feedstock
in both contract and spot markets
during 2004–2009 (a case of
China).
Renewable and Sustainable Energy Reviews 77 (2017) 461–473
Overview of main results Comments
countries (an input to the global
LCOE model).
3) Calculated the weighted average
cost of capital for each country by
relying on various sources of data,
and the cost of capital (the country-
specific discount rate in the global
model).
Support schemes need to capture the Renewable energy policies need a clear point of reference: because the
diversity of power supplies, the incumbent power systems are not sustainable they must adapt to the
variable nature of some renewable requirements of the renewable ones, not the other way round. Incumbent
supplies, and their different attributes systems carry the responsibility of paying the transition, something that
for the purposes of public policy. corresponds best with the polluter pays principle. Distinguished the main
Moreover, these schemes must take types of RE electricity support instruments.
into account the variety of generators
(including DERs) emerging in a
renewable-based system, and the new
relationships between generators and
customers.
The rapid increase in solar PV (from A case of Southeast Queensland in Australia which has one of the highest
close to zero at the start of 2009) has penetration rates of domestic solar PV in the world.
resulted in a massive transfer of Detailed review of the literature: electricity tariff design (1892–1976).
wealth and costs between customer
groups. Electricity distribution
network capacity is primarily driven
by periodic demand, and household
load generally peaks in the early
evening, whereas solar PV production
peaks during the middle of the day
and thus a mismatch exists.
Reported general power load
accounted for 52% of household
final demand, electric hot water
represented 18%, air-conditioning
constituted 17%, lighting consumed
additional 10%, and oven use was at
3%.
The sole market mechanisms are
not sufficient to guarantee economic The challenge is to make the necessary paradigm change to: (1)treat rural
sustainability of the PV projects. electrification as local development, (2) institutionalizealready existing mini
That is one of the reasons why grids within the electricity sector, and (3) executethese projects with the
traditional electricity distribution support of multidisciplinary teams toempower local management and
companies showed the lack of promote productive electricityuse with clear input and control of local
interest in promoting rural community to promotecommunity ownership.
electrification with other means
than grid extension. The local
development initiatives and
promoting alternative ways for
implementation renewables
through partnership between local
new actors in the electricity sector
and government and implementing
policy on a local municipal level
might bring fruits.
China's policy approach to renewable Progress has been made in solar PV technologies in China.
energies prioritized the development A case of China: withregardto the PVsector,itwas
of renewable energy manufacturing notuntilJuly2009thatthetworenewableenergypolicies—the
industry and only then renewable solarPVconcessionprogramandthenationwideFITspolicy—were put
energy itself, and it has not effectively inplace,mainlytriggeredbytheneedtorescuethestruggling domestic
met the ideal of appropriate PVmanufacturingindustry.
interactions between renewable
energy policy and renewable energy
industrial policy. There is a need to
foster the interactions between
renewable energy policy and
renewable energy industrial policy.
PV energy sector problems for
China: Industrial overcapacity;
Under-deployment of renewable
energy
Proposed the structural Econometric model. Detailed review of solar market policy events
decomposition of the real price of PV (throughout the world).
Si feedstock such as the exchange rate
shocks, production cost shocks,
aggregate demand shocks, and
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W. Strielkowski et al. Renewable and Sustainable Energy Reviews 77 (2017) 461–473

Table 4 (continued)

Study Type of information Overview of main results Comments

demand shocks specific to feedstock

Alnaser and Direct feedback: monitoring (maps;
Alnaser [1] statistics; photos) and describing
the status of renewable energy in
the Gulf countries. Description of
the two actually installed project PV
in United Arab Emirates.
Reiche [25] Direct feedback: the process of
transforming oil wealth into
renewable energy leadership and a
transition from a 20th century,
carbon-based economy into a 21st
century sustainable economy on the
example (a case study of “Masdar
City,” a planned carbon-neutral
town in Abu Dhabi based on solar
PV energy).
markets.
The real price of PVSF is Identification of structural shocks to solar PV Si feedstock prices during
determined by structural shocks in 2004–2009.
global markets of foreign exchange,
energy substitutes, aggregate
economic activities and PVSF, but
they are not linked to the degree
that structural shocks in each
market have the same effects on the
determination of real price
fluctuations of PVSF. Energy
markets and real economic activity
have exhibited a long-lasting
contribution to real price
fluctuations of PVSF, and demand
shocks specific to PVSF markets,
which are focused on the shocks of
unexpected demand and demand
uncertainty, and shocks of exchange
rate have been responsible for
sharper price fluctuations in the
relatively short run.
Estimation of the cost of kWh from Listing the major renewable energy projects (mainly solar and wind) in each
PV: the cost of kWh from large grid of the six GCC countries. The projects made in the GCC countries allow
connected solar thermal plant researchers and investors to size the cost of kWh from thermal, PV and wind
(20 MW) – with cost of USD 72.5 energy more precisely.
million and energy – is US ¢ 12/kWh
(assuming a life time of 40 years and a
discount rate of 4%) while, the cost
issue of kWh from PV electricity (in
the GCC countries) is ranging from US
¢ 27 (for ground mount) to US ¢ 35
(for roof mount).
The key characteristics of Masdar The project is still on-going (due to the financial crisis in 2008) but it raises
City, analysed as well as the drivers many important concerns and sets up a good example.
behind the project, identifies the main
actors for its implementation, and
identifies the main obstacles to
creation and development as well as
the policy behind Masdar City.

power represents just 3% of China's electricity mix, it is expanding its
facilities, such as the world's biggest solar plant in the Gobi desert.
India is planning to increase its solar capacity to 100 GW (about 20
times increase) by 2020 and it is expected that the solar power would
account for 12–13% of the country's energy mix by that time.
There is a plethora of research literature on the deployment of solar
PV, including domestic solar PV. Table 4 that follows provides a
literature review that includes some relevant solar PV tariff-themed
studies from all over the world.
Overall, it seems that PV boom might have adverse economic
effects. For instance, Antonelli and Desideri [3] describe a boom in the
PV Italian market after the introduction of feed-in tariffs in 2005 and
argue that the Italian PV industry was not stimulated by the incentives
and the policy led to the massive creation of companies involved in PV
installation and maintenance, while the cost of the PV plants compo-
nents, design and commissioning have followed quite a particular
trend, which is more determined by the tariffs than by the market
development and structure. They conclude by stating that it is crucial to
devise the right tariff mechanisms and benefits for minimizing financial
disturbances on the market and for promote real competition instead of
a simple financial operation under a veil of “green economy”.
When it comes to PV support schemes, it appears that they need to
be adaptive and diverse in order to provide sustainable deployment.
Verbruggen and Lauber [31] analyse renewable electricity support
instruments based on solar PV and come to a conclusion that support
schemes need to capture the diversity of power supplies, the variable
nature of some renewable supplies, and their different attributes for the
purposes of public policy. Moreover, these schemes must take into
account the variety of generators (including DERs) emerging in a
renewable-based system, and the new relationships between generators
and customers.
Moreover, Cludius et al. (2014) demonstrate that the Australian
Renewable Energy Target (RET) which spurred significant investment
in renewable electricity generation also caused significant redistribu-
tive transfers between different energy user classes. RET costs are
passed on to Australian power consumers in the form of retail
electricity price premiums. It appears that some energy-intensive
industries are benefiting from lower wholesale electricity prices while
being largely exempted from contributing to the costs of the scheme.
On the other hand, many households are paying significant RET pass
through costs while not necessarily benefiting from lower wholesale
prices.
Furthermore, Ondraczek et al. [23] argue that the adoption of solar
photovoltaic (PV) technologies in the recent years might have come at
an unnecessarily high price. Their results suggest that the levelled the
costs of electricity (LCOE) of solar PV systems in Northern countries
may in fact be lower than in equatorial countries, and high latitude
countries may thus not have been an unwise location to subsidize the

467
W. Strielkowski et al.
adoption of solar PV technologies. They find evidence for the efforts to
expand PV installation in equatorial developing countries benefiting
from policies designed to make low cost finance more widely available
which supports the on-going efforts to “de-risk” low carbon invest-
ments.
Yu et al. [33] study the wild price fluctuations of solar PV Si
feedstock in both contract and spot markets during 2004–2009 and
propose the structural decomposition of the real price of PV Si
feedstock such as the exchange rate shocks, production cost shocks,
aggregate demand shocks, and demand shocks specific to feedstock
markets.
Sharaf and Orhan (2015) assess the potential of concentrated
photovoltaic thermal (CPVT) solar collectors that promises to ensure
the penetration of solar energy into modern day power generation
technologies. CPVTs‫ ׳‬flexibility, manufacturability, high efficiency, and
multi-output nature inspired many innovative designs and design
improvements.
Sooriyaarachchi et al. (2015) focus on the job creation as an
important component of the socio-economic effects associated with
the development and deployment of renewable energy (RE) and energy
efficiency (EE) technologies including the solar PV. They show that the
potential contribution of the RE and EE sectors in creating new jobs
might affect the public policy as well as the allocation of public
resources to promote related activities. Bawakyillenuo [6] describes
the dissemination and utilization of solar PV technology in Ghana,
Kenya and Zimbabwe from the 1960s to 2007. He analyses the socio-
economic and political measures that informed the varied dissemina-
tion outcomes of the technology in these countries. Furthermore, he
recommends critical steps which Ghana needs to undertake to enhance
the replication of the Kenyan and Zimbabwean PV success stories. In
addition to that, Brown et al. (2014) analyse solar home system use in
Lundazi, Zambia. They state that the solar technology has enabled
clients to improve light quality in their houses or shops and in generally
resulted in an improvement of their living standards. They demonstrate
that increased panel effect, change of the cutting points of the regulator
and improve the users’ knowledge on proper operation of the system
are options to tackle the situation of increased loads put on the system.
Mokri et al. [20] describe the solar energy as an essential future
energy source in the oil-rich United Arab Emirates. They show the
effect of the local environmental operating conditions on the perfor-
mance of different technologies, strategies for financing projects and
encouraging home-owners to install PV, and benefits of solar energy to
the electricity generation, water production and transportation sectors
in the sun-abundant country.
Karakaya et al. (2016) explore the business model of a local solar
company in a town of 43,000 habitants in Germany,the country with
the highest installed capacity of photovoltaic systems, to explain why
the diffusion rate of photovoltaic systems is decreasing and whether
this development might be attributed to the local solar companies
having a vital driving role in diffusion, or the business models and
challenges such local companies may have. They come to a conclusion
that business models and challenges such local companies have a
crucial role in this process and may not only let the company survive
but also drive the diffusion of solar photovoltaic systems in the region.
Balta-Ozkan et al. [4] use spatial econometric approach to find the
determinants of the regional distribution of photovoltaic deployment in
the UK. They show that the substantive drop in the cost of panels since
2007, coupled with the introduction of the Feed-in Tariff (FiT) Scheme
in 2010, has resulted in a rapid increase in installation of PV panels in
the UK, from 26.5MWp in 2009 to over 5 GW by the end of 2014 [4].
Their results indicate that demand for electricity, population density,
pollution levels, education level of households and housing types are
among the factors that affect PV uptake in a region. Moreover,their
results indicate significant regional spillover effects on the UK solar
energy market.
468
Renewable and Sustainable Energy Reviews 77 (2017) 461–473
3. The data: overview and analysis
The data used in this paper come from the smart meters’ readings
provided by the Customer-Led Network Revolution (CLNR) monitor-
ing customer trial conducted with the 199 households in the Northern
England (hereinafter referred to as the CLNR project) that provides the
data from the study of household electricity use and tariff behaviour
between October 2012 and July 2014.
The data included the smart meter readings from household
electricity use and tariff behaviour between October 2012 and July
2014 (17/10/2012–31/07/2014). The information about each house-
hold was very detailed and included the metering from the following 36
channels: air conditioner 1 power, appliance 1 power consumption,
appliance 2 power consumption, av equipment 1 power, av equipment
2 power, computer 1 power, dishwasher only power, downstairs light 1
power, electric heater 1 power, electric heater 2 power, electric heater 3
power, fridge/freezer power, heat pump power consumption, hob
power, kettle power, main cooker/oven power, main freezer power,
main refrigerator power, main tv power, microwave power, secondary
cooker power, secondary freezer power, secondary refrigerator power,
set top box 1 power, small appliances 1 power, small appliances 2
power, solar power, tumble dryer power, tv 2 power, washer dryer
power, washing machine power, water heater power, whitegoods 1
power, whitegoods 4 power, whole home power import, and wine
cooler power.
For the sake of comparison, we also used the data from the trial of
155 households with solar PV collected by the Customer-Led Network
Revolution project between June 2012 and March 2014. The data from
the second trial were not so detailed (there were no channels recorded
as in the first case) and provided observations on solar power total and
the whole home power import (both measured in kW). The data needed
to be adjusted to represent the 30-min data for an average day for an
average household with and without solar PV which represents full
17,520 data points for each year (48 half-hour intervals multiplied by
the 365 days). Fig. 1 depicts the generation across all customers with
solar PV across weekdays and weekends in each season for 2013
(kW h).
The two datasets in question were used for this study for a specific
reason: CLNR project data [9–11] were obtained from the customer
trials with the UK electricity customers and yielded the most detailed
and accurate datasets showing the consumption of electric energy and
tariff behaviour in British households broken by the individual
appliances up to date. Alongside with the Low Carbon London
Project conducted by the UK Power Networks [32] that also aimed at
estimating the impact of low carbon (renewable energy sources)
technologies on London's electricity distribution network but focused
more on the use of electric vehicles (EV) and reported the bulk
electricity consumption for the households as a whole, the CLNR trials
offered the best sets of data comparable with those from the solar PV
Fig. 1. Generation across all solar PV households in each season for 2013 (kW h).
Source: CLNR (2014) [11]
W. Strielkowski et al. Renewable and Sustainable Energy Reviews 77 (2017) 461–473

consumer study in Southeast Queensland conducted by Simshauser Table 6

[29] and therefore applicable for computing our empirical model Household electric power by the type of equipment/household appliances (a sample of
mixed 199 households), average day values in kW.
presented in the next section.
Source: Own results
The statistical analysis of the data was performed in order to
investigate the rated peaks and the measured peaks, thus plotting the Households with solar PV Households without solar PV
entire data set was required. The validity of the classification of
measured peak is questionable for several observations, especially with Average value kW Average value kW

regard to the minimum and maximum observed extreme values. The Heat pump power consumption 1.012 Electric heater 1 0.169
statistical data analysis enabled us to provide an appropriate overview Fridge/freezer 0.137 Main freezer 0.112
of the analyzed data. Tumble dryer 0.072 Washer dryer 0.111
Looking at the data, one could establish the annual peak kWh Kettle 0.040 Main TV 0.095
Washing machine 0.032 Tumble dryer 0.095
export and import charges were the highest day for Tuesday, 11th of
Main TV 0.014 Fridge/freezer 0.095
June 2013 and lowest for Saturday, 4th of January 2014. For the sake Microwave 0.010 Secondary freezer 0.088
of comparison, we calculated the annual peak kWh export and import Whole home power import 1.562 Computer 1 0.071
charges for Low Carbon London project (UK Power Networks Smart
Solar power 0.642 AV equipment 1 0.064
Meter Energy Consumption Data in London Household) data: the
Dishwasher only 0.062
typical day was 10th of October 2013 (1.4 kWh), the highest day was AV equipment 2 0.048
16th of June 2013 (3.1 kWh), and the lowest day was 30th of December Main refrigerator 0.045
2012 (0.09 kWh). Washing machine 0.041
The households in our samples are located in the Northeast and are TV 2 0.041
Secondary cooker 0.038
served by the Npower. The company applies 4 basic methods of
Kettle 0.034
electricity payment type: monthly direct debit, prepayment, quarterly Main cooker/oven 0.029
variable direct bill, and receipt of bill. Moreover, the electricity tariff Wine cooler 0.028
can vary depending on the fix and other arrangements and it can secondary refrigerator 0.027
Set top box 1 0.026
assume over 20 different values. Table 5 that follows shows the
Small appliances 1 0.015
example of Npower residential contract prices in 2013. Small appliances 2 0.013
The data analysis and the data basic averaging and clustering (from Microwave 0.012
the largest to the smallest) revealed the following division of equipment Downstairs light 1 0.008
(appliances) for the 20 households with solar PV and 179 households
Note: Full list of appliances includes the following items: air conditioner 1 power,
without solar PV from the total sample of the 199 households of CLNR
appliance 1 power consumption, appliance 2 power consumption, av equipment 1 power,
project data (Table 6). CLNR had smart meters installed on every av equipment 2 power, computer 1 power, dishwasher only power, downstairs light 1
household appliance (e.g. TV, fridge, computer, etc.) and recorded the power, electric heater 1 power, electric heater 2 power, electric heater 3 power, fridge/
data both for the whole household and for each appliance separately. freezer power, heat pump power consumption, hob power, kettle power, main cooker/
It becomes apparent that the freezer and washer, tumble dryer oven power, main freezer power, main refrigerator power, main tv power, microwave
consume most power in both types of households. However, the heat power, secondary cooker power, secondary freezer power, secondary refrigerator power,
set top box 1 power, small appliances 1 power, small appliances 2 power, solar power,
pump and water heater also occupy the top positions in the list of
tumble dryer power, tv 2 power, washer dryer power, washing machine power, water
appliances in the case of the households with solar PV which is the heater power, whitegoods 1 power, whitegoods 4 power, whole home power import, wine
main noticeable difference. This suggests that the British households cooler power.
with solar PV might use their solar power mainly on heating their
households (which is the case of Scotland as suggested by the earlier
CLNR findings and reports on the general unified electricity tariff and

Table 5
Npower retailer contracts for 2013.
Source: Npower (2016).

Electricity

Domestic Electricity Standard Tariff Domestic Economy 7 Tariff

AREA Area MPAN Non-DD Daily DD Daily Non DD DD Unit Non-DD Daily DD Daily Non-DD Non-DD DD Unit DD Unit
Code REC ID Standing Standing Unit Rate (£) Standing Standing Unit Rate Unit Rate Rate (£) - Rate (£) -
Charge (£) Charge (£) Rate (£) Charge (£) Charge (£) (£) - Day (£) - Day Night
Night
Eastern EA 10 n/a 0.4250 n/a 0.1281 n/a 0.4340 n/a n/a 0.1476 0.0858
EMEB EM 11 n/a 0.4290 n/a 0.1318 n/a 0.4390 n/a n/a 0.1514 0.0846
London LO 12 n/a 0.4190 n/a 0.1307 n/a 0.4320 n/a n/a 0.1522 0.0862
Manweb MW 13 n/a 0.4090 n/a 0.1449 n/a 0.4310 n/a n/a 0.1721 0.0898
MEB ME 14 n/a 0.4220 n/a 0.1308 n/a 0.4320 n/a n/a 0.1501 0.0838
Northern NO 15 n/a 0.4240 n/a 0.1329 n/a 0.4350 n/a n/a 0.1527 0.0856
Norweb NW 16 n/a 0.4220 n/a 0.1400 n/a 0.4340 n/a n/a 0.1582 0.0878
Scottish- SH 17 n/a 0.4160 n/a 0.1449 n/a 0.4330 n/a n/a 0.1669 0.1050
Hydro
Scottish SP 18 n/a 0.4140 n/a 0.1296 n/a 0.4310 n/a n/a 0.1531 0.0870
Power
Seeboard SE 19 n/a 0.4270 n/a 0.1326 n/a 0.4390 n/a n/a 0.1525 0.0849
Southern SO 20 n/a 0.4170 n/a 0.1355 n/a 0.4300 n/a n/a 0.1516 0.0849
SWALEC SC 21 n/a 0.4170 n/a 0.1416 n/a 0.4300 n/a n/a 0.1602 0.0864
SWEB SW 22 n/a 0.4120 n/a 0.1405 n/a 0.4330 n/a n/a 0.1662 0.0866
Yorkshire YK 23 n/a 0.4210 n/a 0.1292 n/a 0.4310 n/a n/a 0.1492 0.0845

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W. Strielkowski et al. Renewable and Sustainable Energy Reviews 77 (2017) 461–473

Table 7
Differences in Network Charges for Residential Consumers in South Queensland.
Source: [28].

Household A Household B Household C Household D

No air-con Air con No air-con Air-con

No Solar PV No Solar PV Solar PV Solar PV

Maximum Demand 1.41 2.14 1.50 2.09

(kW)
Metered import 6253.4 7560.6 3820.1 4707.1
(kWh)
Solar Export (kWh) 0 0 2259.1 1838.8
Gross Demand 6253.4 7560.6 6253.4 7560.6
(kWh)
Number of 283,849 694,643 26,151 235,357 Fig. 3. Averaged electricity generation for solar PV households (2013).
customers Source: CLNR [11].
% of customers 23% 56% 2% 19%

consumption due to the household own production. This significantly

Base Network $1006.14 $1171.37 $698.57 $810.69 reduces their share of the per kWh costs of the distribution system.
Tariff However, the existing revenue cap regulation of the distribution
Differences A-C B-D charges means that the same revenue has been made as the number
$307.57 $360.68
of units has fallen, which means that per unit charges have risen and
the distribution of their payment between different types of households
its benefits and outcomes for the United Kingdom). has dramatically changed.
Amongst the other top appliances are the fridge, TV, computer and In order to shed some light on the new arrangements, Simshauser
the tumble dryer (its average power consumption is close or approach- [28,29] analyses four types of household: households with no PV and
ing to that of the main TV in the case of household without solar PV). no air-conditioning (the poorest group); households with air-condi-
The other appliances follow – the list is depicted in the Table 7. tioning and no PV; households with PV and no air-conditioning; and
Fig. 2 that follows shows the average day values for the “main” households with PV and air-conditioning. He looks at how the charging
(most heavily used electric appliances) in the 20 households from the mechanism has shifted the payments and considers a more cost
198 mixed households sample as well as their solar power average. reflective charging regime where each household pays a fixed charge,
Fig. 3 reports the averaged electricity generation by months. a per kW peak charge and a variable per kWh charge which better
The key findings from the CLNR study for the smart meter reflects underlying costs. Simshauser [29] suggests that households
households can be summarized as the following: with PV and air-conditioning have only a fractionally lower peak per
kW usage compared to those with no PV but air-conditioning.

• The results demonstrated that on the four days of greatest network Moreover, households with air-conditioning and no PV pay less than
they should towards distribution charges. This creates a disadvantage
stress, the peak demand average was 0.9 kW between 17:00 and
18:00. for the poorest group of households (households without PV and air-

• Electricity demand remained broadly the same at peak hours
whether it is on a weekday or at the weekend.
• Households identified as ‘rural off-gas’ and ‘high income’ customer
sub-groups’ had the demand that could exceed 1 kW at network
peak in winter.
4. Empirical model: results and implications
Our empirical model is largely based on the model specified in
Simshauser [29], albeit with some extensions and modifications.
Solar PV consumers in Southeast Queensland have lower metered
Fig. 2. Average power (average day) for the “main” appliances and solar power.
Source: Own results.
conditioning) which currently pays 307 Australian dollars p.a. more (or
about £112 (1 AUD=0.53 GBP as of 16 March 2016), i.e. around 40%
more) than those with PV and no air-conditioning (see Table 8).
These findings reveal that the starting point of charging is already
unfairly subsidising peaky users with air-conditioning and that the
system has rapidly become much more unfair with the high take-up of
PV. A more cost reflective three-part tariff schemes sees those with PV
and air-conditioning paying 28% more than they are paying now and
those without both paying 15% less (with the result that the poorer
households pay around 180 AUD (about £95) less). In mathematical
terms: the relationship between kWh and kW peak observed prior to
the arrival of PV has fundamentally changed, such that kWh are a poor
proxy for kW peak demand.
The main computational problem one can derive from Simshauser
[29], is the interpretation of data. It is quite unclear which type of data
to use in order to run the model in a similar fashion: a) the data for the
period 1 or b) the data for the period that includes prior periods
(cumulative), or c) the data for some isolated periods of time. In
general, it is not clear whether it is possible to sum up the average
power consumption and obtain the data for the day or not. Hence, the
average power, or the standard deviation, that Simshauser [29] uses
and that most likely cannot be summed up.
Simshauser [29] uses a two-part scheme for calculating the tariff. It
includes capacity payments and pay for the consumed energy.
Simshauser [29] divides it by a fixed fee per day and a variable
payment for the consumed energy from the network, depending on the
time of day in which the cost of electricity is different. The algorithm for
calculating the total revenue can be summarized as follows:

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W. Strielkowski et al. Renewable and Sustainable Energy Reviews 77 (2017) 461–473

Table 8
Differences for Residential solar PV,non-PV, EV and non-EV households in Northern England.
Source: Own results.

Household A Household B Household C Household D

No Solar PV Solar PV No Solar PV + EV Solar PV + EV

Maximum Demand (kW) 1.69 1.69 1.69 1.69

Metered import (kWh) 2540.08 1800 5540.08 4800
Solar Export (kWh) 0 740.08 0 740.08
Gross Demand (kWh) 2540.08 2540.08 5540.08 5540.08
Number of customers 3,040,000 59,751 3,040,000 59,751
% of customers (referred to the main group) 98.1% 1.9% 98.1% 1.9%
Base network tariff £88.53 £67.87 £172.29 £151.63
Two-part tariff £252.83 £16.99
Demand tariff £69.99 £2.49
Differences B-A D-C
Base network tariff £20.66 £20.66
Two-part tariff £235.84
Demand tariff £67.5

Note: Two-part tariff and demand tariff are expressed in annual charges per household (£).

• The day is divided into four periods of time. Each of these periods
has its own variable tariff rate.
• We calculate the amount of energy consumption of the network for
the households in each of the periods in question. In order to do this,
we find the total energy consumption of household appliances for
the period and subtract from it the amount of energy generated by
PV (solar panels). If the solar PV generated more than was the total
load of the household at a given hour of the day (half-hour
intervals), one can say that the household do not consume the
power from the grid.
• Then, we calculate the total cost of electricity per day, taking into
account savings from solar panels: a constant rate per day rate +
sum of the products of the variable rate on the amount of energy
consumed from the network for the selected period.
• The procedures described in 2 and 3 are repeated for each house-
hold and then all the resulting values are summed up. This gives us
the total cost of households, or the revenue for the network company
to which household is connected.
Based on the tariff model presented in Simshauser [29], we
construct an updated and optimized model with a maximum demand
of 1.05 kW for the non-solar household and 1.69 kW for a solar (PV)
household (the maximum demand values are approximations based on
the CLNR project data). Moreover, in our simulation we use the
approximation of metered import of 1589.184 kWh for non-solar and
1799.939 kWh for a solar household (the approximations based on the
averaged metered import derived from the CLNR data). The gross
demand in our simulation is set at 1589.184 kWh and 2540.088 kWh
respectively and the number of customers is based on the number of
solar and non-solar households in Northern Powergrid (Northeast
England) at the time of the data collection (2013). The values of the
approximation are depicted in Table 8 that follows.Our model can be
presented in the following manner:
Let us have a aset of households H, a aset of billing days D, a set of
half-hour (HH) periods P. Any billing day consist of 48 HH disjoint
intervals P. Let Z be a number of 4 period types – non-overlapping time
intervals that consist of HHintervals. Billing days (D) can be divided
into three types of days:
• Workdays (except critical): midnight-7 a.m. (off-peak), 7 a.m.-
4 pm(shoulder), 4–8 p.m.(peak), 8–10 p.m.(shoulder), 10 p.m.-
midnight(off-peak)
• Holidays: midnight-7 a.m.(off-peak), 7 a.m.-4 p.m.(shoulder), 4–
8 p.m.(shoulder), 8–10 p.m.(shoulder), 10 p.m.-midnight(off-peak)
• Critical workdays: midnight-7 a.m.(off-peak), 7 a.m.-4 p.m.
(shoulder), 4–8 p.m. (critical-peak), 8–10 p.m.(shoulder), 10 p.m.-
midnight(off-peak).
Standard-peak periods are defined as union of peak and critical-
peak periods. The critical workdays are list defined, 12 'critical' days in
summer and winter. We have a net demand for each billing day and for
each period defined as:max (quantity consumed - quantity produced,
0). According to Simshauser [29], the quantity consumed/produced,
i.e. net demand values should be metered in kWh. In another words,
net demand is kWh that the consumer (a residential household)
received from the supplier of electricity:
qij = max[(φij −pvij ),0] (1)
where:
φij – a total household quantity consumed by household hi in each
period pj ,
pvij – a total solar PV quantity produced by the household hi in each
period pj ,
qij – a Net Demand (metered quantity supplied by the grid).
We have two tariff models defined as follows:
a) Two-part tariff model
One daily charge consist of fixed charge applied to each billing
day and flat rate variable charge multiplied by net demand(one
daily charge, £) =(fixed day charge, £) +(total net demand for a
given day,kWh) *(flat rate variable charge, £/kWh). Since we have
fixed day charge in tariff, it makes sense to calculate data none less
than on the basis of the daily data. As expressed in mathematical
terms:
y∈{1…z} ∧ tys∈Tys (2)
and
Tys ( j ) = tks, pj ∈Ik (3)
where:
tys - a digital meter variable tariff for period y ,
Tys - the ordered set of time-of-use tariffs.
Ik – a set of peak and off-peak periods
b) Demand tariff mode
In order to calculate the Demand Tariff (δ), we need to define the
maximum demand. It can be expressed as(maximum demand) =
max(net demand,kW), with the maximum demand value being calcu-
lated for critical workdays only.
Therefore, one daily charge consist of fixed charge applied to each
billing day, a sum of variable charges applied to each of HH periods

471
W. Strielkowski et al.
within that day, a variable charge depending on daily period type (peak,
off-peak, shoulder, etc.), and the maximum demand charge can be
expressed as (daily charge, £) =(fixed day charge, £) + sum((net
demand for a given period of a day, kWh) *(variable charge for period
type - peak, off-peak …, £/kWh)) +(mean (maximum demand, kW)
+1*stdev (maximum demand, kW)) *(demand tariff, £/kW). Charges
should be calculated on a daily basis for the same reason as for two-
part tariff model. Expressed in mathematical terms:
∀ b , i ∣ db ∩ I4 ≠ { }∶wib = max[qij ∣ pj ∊ {db ∩ I4}]
and
∀ b , i ∣ db ∩ I4 ≠ { }∶zi = 1*Stdev [wib] + Mean[wib]
where:
wib – a calculated Maximum Demand (measured in kW),
zi – a Mean +1StdDev of all wib for each household hi .
The total revenues (Rim) for each of the models can now be
calculated as the sum of charges calculated according to the tariff
model, for each day di for each household hi. Expressed in mathema-
tical terms:
H i =1 P j =1
Rim= ∑ (T fm * D + ∑ qij *Tvm )
and
H i =1 P j =1
RiS = Rim | RiS = ∑ (T fS * D ∑ qij*TvS ( j +zi*δ )
where:
T fm - a fixed daily charge,
Tvm – a variable energy charge.
Additionally, let us add an implication of having an electric vehicle
(EV) in each type of a household. Let us assume that an EV would add
additional 3000 kWh per kW in electricity consumption (an average EV
consumption in the United Kingdom (see [21]). We repeat the
calculations for the households with and without solar PV but adding
some hypothetical EV consumption of 3000 kWh per kW to show the
implications.
Let us run the basic calculations for the non-solar households:
365*£0.0483 + 2540*£0.02792 = £17.62 + £70.91 = £88.53
The same calculations can be done for the solar households:
365*£0.0483 + 1800*£0.02792 = 17.62 + 50.25 = £67.87
The difference is £88.53 − £67.87 = £20.66 . In addition, there is also
solar households’ export: 740.08kWh*£0.1292(FIT in2013) = £95.61
Let us look at the non-solar households with electric vehicles (EV):
365*£0.0483 + (2540 + 3000) * £0.02792 = £17.62 + £154.67 = £172.29
(10)
Solar households with EV:
365*£0.0483 + (1800 + 3000)*£0.02792 = £17.62 + £134.01 = £151.63
(11)
There is a difference of £20.66 which is what the solar households save
by using what they are generating for charging their electric vehicles.
Table 8 that follows applies the model specified in (1)-(7) for
sample of households with and without solar PV and EV in Northeast
England. The last two rows of the table depict the savings that solar PV
households and non-solar PV households (as well as EV and non-EV
households) make by using either two-part tariff scheme of the demand
tariff scheme.
Looking at the results presented in Table 8, one can see that in case
of solar PV households and EV households, the annual savings are
larger in case of a two-part tariff: they are 6.8 times in the case of
households with solar PV and only 3.6 times for the households
without solar PV. Households with solar PV are benefitting from the
two-part tariff scheme although their solar power generation and
consumption does not seem to affect their overall electricity consump-
Renewable and Sustainable Energy Reviews 77 (2017) 461–473
tion behaviour [8,19].
Moreover, one can notice the differences in between households
with and without solar PV being £235.84 in the case of two-part tariff
and £67.5 in the case of demand tariff. These are the amounts that the
poorest British households pay in excess per annum compared to the
households with solar PV (similar to the case of South Queensland).
The differences in the base network tariff is £20.66 for solar and non-
solar (as well as EV and non-EV) households.
Comparing the results of both models (a Simshauser [29] model
(4)
and a modified model), one can clearly see that even though the
magnitude of the results in the UK model is several times less than in
the case of Australian model (£67.5 ($108) compared to $307.57
(5)
($360.68 respectively) in the case of Australia), the main issue remains
the same – namely the UK solar PV households (similar to their
Australian counterparts) seem to besubsidized by the non-solar PV
households due to the current UK tariff charges and the whole situation
appears to be economically ineffective.
5. Conclusions and discussions
Solar photovoltaics (as well as other renewable energy sources) are
(6) gradually gaining larger shares on the world's electricity markets. The
commitments to the low-carbon future and over-enthusiastic approach
for the renewables causes the increase of governmental support and
(7) investments into their further development and deployment. However,
as the support for the renewable energy grows, there are several
adverse effects, such as market distortions due to the decrease of
revenues of generating utilities from the traditional wholesale power
markets, issues with the intermittency of renewable energy sources that
work only in certain conditions (e.g. when the sun is shining or when
the wind is blowing) and thus need to be supported by the traditional
coal and gas power plants, or zero marginal running costs of the
renewables that reduces the incentives for the traditional energy
providers. As a result, electric energy prices go down (regardless of
the generating source) and the revenues decrease both for traditional
energy providers and for the renewable generators. The more renew-
able energy is introduced into the traditional energy market system, the
(8) higher is the electricity bill.
There are different electricity tariffs charges and methods, more-
over there is also a plethora of principles how to charge for electricity
(9) networks. This way or another, any charging methodology for an
electricity network has to deal with fixed cost recovery.
The commitment to the low-carbon future that many world
governments pledged themselves to brought about higher penetration
of renewable energy sources on the electricity markets. Higher shares
of RES (such as for example solar PV panels) offers many new
opportunities for amending and improving the existing system of
network charges in ways that were not originally considered before
by economists or policy-makers.
Our results demonstrate that similar to the other studies conducted
in other countries that have the schemes promoting residential solar
PV panels, the increase in the solar PV panels energy generation lead to
the redistribution of wealth and costs among existing customers.
Thanks to their own production of solar energy, UK solar PV house-
holds bear a lower share of the per kWh costs of the distribution system
which in turn leads to the increase of per unit charges as well as to the
changes in the distribution of their payment between different types of
households. The obvious conclusion that from all this is that UK solar
owners do not contribute to the grid as they should be.
One of the possible solutions to bring the justice to the system
would be to install the more cost reflective apportionment of charges
between fixed, per kW peak and per kWh use of system charges.
Another option is the introduction of the new type of charge at that
voltage level (e.g. kW peak export tariff).
Moreover, it appears that the new uses of the electricity network
create opportunities for reallocating charges to new users and away
472
W. Strielkowski et al.
from disadvantaged users (e.g. poor or elderly residents). New uses of
the traditional electricity market and tariffs create many promising
opportunities for reallocating charges from the existing users who may
be poor and vulnerable.
Overall, the new reality that includes the growing importance of
renewables on the electricity markets, dictates the necessity to envisage
and implement the new rules for network charges in order to prevent
the market distortions and the unwanted consequences on both
generating companies and consumers.
Acknowledgements
The authors would like to thank CLNR and Northern Powergrid for
the data on Northern England households. They would also like to
thank Ofgem's Low Carbon Network (LCN) Fund which funded the
CLNR project.
Moreover, we would like to thank Professor Paul Simshauser for his
inspiration for this paper and Professor Michael Pollitt from Energy
Policy Research Group, University of Cambridge for his help, assistance
and valuable comments that greatly contributed to the completion of
our research.
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