Modelling and Assessing the Impact of the DSO Remuneration Strategy on its Interaction with Electricity Users

This paper presents a simulation-based methodology for assessing the impact of employing different distribution system operator’s remuneration strategies on the economic sustainability of electrical distribution systems. The proposed methodology accounts for the uncertainties posed by the integration of distributed electricity generation resources, and the roll out of smart-meters. The different remuneration strategies analysed in this paper include notably new distribution tariffs based on individual peak power consumption and time-dependent rates that are contingent on the time of energy consumption, both requiring smart-meters to work. The distributed electricity generation resources are modelled through an optimisation framework and an investment decision process that gradually deploys household photovoltaic installations depending on their profitability and the electricity charges, including the distribution rates. The impact of the distribution system operator’s remuneration strategy is measured by an accurate modelling of the remuneration mechanism of this entity, which can adapt to various distribution tariff designs. We analyse this impact over a discrete time horizon. Our methodology is illustrated with several examples of distribution tariffs including old –based on energy consumption or on per-connection fees– as well as new –based on power consumption or time-of use fees– designs. Finally, we provide a comprehensive sensitivity analysis of the proposed simulation environment to the main parameters of the methodology.