Correction to: Forward-looking distribution network charges considering lumpy investments
Govaerts, Niels Bruninx, Kenneth Le Cadre, Hélène Meeus, Leonardo Delarue, Erik
Govaerts, Niels
Bruninx, Kenneth
Le Cadre, Hélène
Meeus, Leonardo
Delarue, Erik
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Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2021-06
Journal
Journal of Regulatory Economics
Book
Publication Volume
59
Publication Issue
3
Publication Begin page
280
Publication End page
302
Publication Number of pages
Collections
Abstract
Many regulators are pushing for more cost-reflective distribution network charges to inform end users of the grid infrastructure costs their behavior causes. Since future investment costs can be avoided by reducing simultaneous peak loads, forward-looking, coincident peak charges are often proposed. Under the assumption of convex network costs, it has been shown that optimal charges signal long-run marginal network costs, triggering an optimal trade-off between network expansion and peak load reduction. In practice, however, network investments are lumpy, requiring engineering methods to estimate ill-defined marginal costs based on long-term peak demand forecasts. In this paper, we derive the optimal forward-looking network charge set by a social welfare maximizing regulator, endogenously considering investment lumpiness and uncertain consumer demand. While the optimal tariff still equals marginal network costs in essence, it now depends on a multitude of network- and demand-related parameters. Our results demonstrate that forward-looking network charges require accurate information on willingness to pay for peak demand, which currently is typically unknown to regulators.
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Keywords
38 Economics, 3801 Applied Economics