Article

Efficient, effective and fair allocation of costs and benefits in residential energy communities deploying shared photovoltaics

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Abstract

Deployment of rooftop solar photovoltaics on multi-family buildings lags behind other residential buildings sectors, despite the benefit of significantly higher self-consumption achievable by applying on-site generation to aggregated building load. This is, in part, because of challenges in developing suitable business models to ensure the fair allocation of costs and benefits between different stakeholders. Embedded networks can provide a mechanism for consumers to co-ordinate their engagement in the energy market, as well as to distribute on-site generation between multiple households. However, to succeed, an embedded network must deliver benefits to all households as well as providing returns to investors. This paper uses a case-study of a 72-apartment complex in Sydney Australia to explore different ways to distribute the costs and benefits of a potential shared photovoltaic system between apartment owners and residents. A range of tariff structures, including demand or capacity charges as well as fixed and time-varying volumetric charges, are compared for their ability to recover investment costs, incentivise efficient energy behaviour and achieve customer acceptance through fairness and transparency. The analysis demonstrates the tension between these desired outcomes and the significant challenge of designing a mechanism to deliver them all. In particular, tariff structures incorporating peak demand charges, while cost-reflective and efficient, are unable to deliver benefits to all stakeholders and thereby ensure the sustainability of the embedded network. The findings have implications for market design and for policy approaches to support embedded networks and energy communities.

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... For instance, Roberts et al. [29] assume that an energy sharing method is fair if it is transparent, offers equitable savings and guarantees that no prosumer that shares energy is left worse-off. Other descriptive interpretations are adopted by Perger et al. [30], which 4 relate fairness to the prosumer's willingness-to-pay, Jafari et al. [31], which interpret fairness as equal dissatisfaction or Lovati et al. [32], which interpret fairness in terms of a transparent framework for peer-to-peer business models. ...
... Interpretation of fairness Indicator [10] BS, MMR, SDR Individual rationality and equality PWI, EI [13] BS, MMR, SDR, SV Meritocracy F [29] Electricity tariffs Individual rationality, equity, transparency - [30] FRESH:COM Willingness to pay - [31] WGO Equal dissatisfaction - [32] Agent-based model Transparency - [33] SV, MV Coalition stability Strength of stability [34] Nash-type solution Individual rationality - [35] Nash equilibrium Individual rationality and equality - [36] SV Individual rationality, meritocracy - [37] Marginal contribution Meritocracy - [38] SV, nucleolus Individual rationality, meritocracy - [39] SV Individual rationality, meritocracy - [40] nucleolus Coalition stability - [41] Marginal contribution Individual rationality, meritocracy - [42] Six energy sharing methods Individual rationality, equality, coalition stability - [43] Nine energy sharing methods Coalition stability Max. excess [44] Nash-type solution Individual rationality Nash social welfare [45] General communitybased method Equality Jain's index, QoE, min-max [46] Four energy sharing methods Incentive compatibility, coalition stability Max. ...
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Private households are increasingly taking cooperative action to change their energy consumption patterns in pursuit of green, social, and economic objectives. Cooperative demand response (DR) programs can contribute to these common goals in several ways. To quantify their potential, we use detailed energy consumption and production data collected from 201 households in Austin (Texas) over the year 2014 as well as historic real-time prices from the Austin wholesale market. To simulate cooperative DR, we adapt a load-scheduling algorithm to support both real-time retail prices and a capacity-pricing component (two-part pricing schemes). Our results suggest that cooperative DR results in higher cost savings for households than individual DR. Whereas cooperative DR that is based on real-time pricing alone leads to an increase in peak demand, we show that adding a capacity-pricing component is able to counteract this effect. The capacity-pricing component successfully reduces the cooperative's peak demand and also increases the cost savings potential. Effective peak shaving is furthermore only possible in a cooperative setting. We conclude that cooperative DR programs are not only beneficial to customers but also to energy providers. The use of appropriate tariffs allows consumers and suppliers to share these benefits fairly. Full-text: http://www.sciencedirect.com/science/article/pii/S0306261916310431
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Rooftop solar power production is particularly relevant to climate change mitigation in Australia given the country's high insolation rates. However, residential adoption rates vary across the country with potential for increasing uptake, particularly on apartment buildings and rental properties. This study focuses on past and future motivations for the adoption of rooftop solar panels and the barriers people perceive upon adoption. An online survey was conducted with 1126 respondents across Australia showing that 65% of those who had no solar panels were intending to adopt them. Results of best-worst scaling showed that motivations for past and future adoptions did not differ significantly and that economic motivations predominated, particularly for homeowners. Renters, a group often overlooked in the production of solar energy, strongly desired solar panels, often for environmental reasons, but were discouraged by uncertainties about the costs and benefits of installing solar. This reveals a need for policies that help renters and landlords, and those in multi-unit dwellings, to find ways in which the costs and benefits can be shared equitably. This will become more important as energy costs rise and urbanisation intensifies.
Chapter
All multi-owned developments are, by definition, owned collectively by multiple individual owners. While for some, shared ownership can be part of the attraction, for others it is a necessary evil. This chapter focuses on the experience of strata title ownership in New South Wales, Australia. Based on consultation with strata owners, this chapter highlights the mismatch that can occur between the responsibilities of owners as members of an owners’ corporation (body corporate) as enshrined in legislation and people’s knowledge and acceptance of those responsibilities. The chapter concludes with a discussion of why such a mismatch occurs between collective responsibilities as outlined in the legislation, and practice and preferences ‘on the ground’ in strata developments.
Article
Increasingly, residential customers are deploying PV units to lower electricity bills and contribute to a more sustainable use of resources. This selective decentralization of power generation, however, creates significant challenges, because current transmission and distribution grids were designed for centralized power generation and unidirectional flows. Restructuring residential neighborhoods as residential microgrids might solve these problems to an extent, but energy retailers and system operators have yet to identify ways of fitting residential microgrids into the energy value chain. One promising way of doing so is the tailoring of residential microgrid tariffs, as this encourages grid-stabilizing behavior and fairly re-distributes the associated costs. We thus identify a set of twelve tariff candidates and estimate their probable effects on energy bills as well as load and generation profiles. Specifically, we model 100 residential microgrids and simulate how these microgrids might respond to each of the twelve tariffs. Our analyses reveal three important insights. Number one: volumetric tariffs would not only inflate electricity bills but also encourage sharp load and generation peaks, while failing to reliably allocate system costs. Number two: under tariffs with capacity charges, time-varying rates would have little impact on both electricity bills and load and generation peaks. Number three: tariffs that bill system and energy retailer costs via capacity and customer charges respectively would lower electricity bills, foster peak shaving, and facilitate stable cost allocation.
Chapter
The increase in the number of people living in apartments, combined with recent debate about the need to reduce greenhouse gas emissions has put pressure on managing bodies to adopt sustainable retrofits for common areas in apartment buildings. The literature posits that involving different stakeholders in the process and developing strategies to overcome the barriers to their implementation will increase the likelihood of adoption. As gaps exist in the literature, a mixed method approach using depth interviews and an online survey with apartment owners is used. The findings demonstrate that some stakeholders have different opinions and expectations with respect to adopting sustainable retrofits, with owners corporation (body corporate) committees members and apartment owners who live in the apartment being the most likely to encourage the adoption of such measures. To overcome the three main barriers to sustainable retrofits, namely, practicality, individuality, and responsibility, this paper recommends three steps be adopted. As well as identifying who are the initiators, an online information tool is needed, as well as financial and other incentives.
Article
This paper reviews different methods for ensuring economic efficiency when devising tariffs for distribution network services while meeting the revenue constraint.11For further discussions about different regulatory frameworks in regulating network tariffs, the reader can refer to Nepal et al. (2014). There is a long tradition in welfare economics which suggests that prices should be based on long run marginal costs to achieve economic efficiency. However, network revenue requirements are often based on embedded costs, which are typically higher than long run marginal costs. This creates the problem of recovering residual costs. There are several methods available for doing so. Of course, economic efficiency is not the only criterion for designing tariffs. Fairness and gradualism are two other criteria that play heavily in the design of electricity tariffs. By drawing upon representative data from Australia, we illustrate the various methods and evaluate their likely performance on these criteria.
Article
Increasing the self-consumption of photovoltaic (PV) power is an important aspect to integrate more PV power in the power system. The profit for the PV system owner can increase and the stress on the power grid can be reduced. Previous research in the field has focused on either self-consumption of PV power in individual buildings or PV power curtailment for voltage control. In this paper self-consumption of residential PV power in a community of several single-family houses was investigated using high-resolution irradiance and power consumption data. Cases with individual or shared battery energy storages for the houses were examined. PV power curtailment was investigated as a method to reduce feed-in power to the grid, i.e. peak shaving. Results indicated that the self-consumption ratio increased when using shared instead of individual storage. Reducing the feed-in power from the community by almost 50% only led to maximum 7% yearly production losses due to curtailment and storage losses. The economics for shared storage are slightly better than for individual ones. These results suggest that residential PV-battery systems should use (i) shared energy storage options if local regulations allow it and (ii) PV power curtailment if there are incentives to lower the feed-in power.
Article
Microgrids are promising in reducing energy consumption and carbon emissions, compared with the current centralised energy generation systems. Smart homes are becoming popular for their lower energy cost and provision of comfort. Flexible energy-consuming household tasks can be scheduled co-ordinately among multiple smart homes to reduce economic cost and CO2. However, the electricity tariff is not always positively correlated with CO2 intensity. In this work, a mixed integer linear programming (MILP) model is proposed to schedule the energy consumption within smart homes using a microgrid system. The daily power consumption tasks are scheduled by coupling environmental and economic sustainability in a multi-objective optimisation with ε-constraint method. The two conflicting objectives are to minimise the daily energy cost and CO2 emissions. Distributed energy resources (DER) operation and electricity-consumption household tasks are scheduled based on electricity tariff, CO2 intensity and electricity task time window. The proposed model is implemented on a smart building of 30 homes under three different price schemes. Electricity tariff and CO2 intensity profiles of the UK are employed for the case study. The Pareto curves for cost and CO2 emissions present the trade-off between the two conflicting objectives.
Article
This paper reviews different methods for ensuring economic efficiency when devising tariffs for distribution network services while meeting the revenue constraint. 1 1For further discussions about different regulatory frameworks in regulating network tariffs, the reader can refer to Nepal et al. (2014). There is a long tradition in welfare economics which suggests that prices should be based on long run marginal costs to achieve economic efficiency. However, network revenue requirements are often based on embedded costs, which are typically higher than long run marginal costs. This creates the problem of recovering residual costs. There are several methods available for doing so. Of course, economic efficiency is not the only criterion for designing tariffs. Fairness and gradualism are two other criteria that play heavily in the design of electricity tariffs. By drawing upon representative data from Australia, we illustrate the various methods and evaluate their likely performance on these criteria.
Article
The interest in self-consumption of PV electricity from grid-connected residential systems is increasing among PV system owners and in the scientific community. Self-consumption can be defined as the share of the total PV production directly consumed by the PV system owner. With decreased subsidies for PV electricity in several countries, increased self-consumption could raise the profit of PV systems and lower the stress on the electricity distribution grid. This review paper summarizes existing research on PV self-consumption and options to improve it. Two options for increased self-consumption are included, namely energy storage and load management, also called demand side management (DSM). Most of the papers examine PV-battery systems, sometimes combined with DSM. The results show that it is possible to increase the relative self-consumption by 13–24% points with a battery storage capacity of 0.5–1 kW h per installed kW PV power and between 2% and 15% points with DSM, both compared to the original rate of self-consumption. The total number of papers is however rather limited and further research and more comparative studies are needed to give a comprehensive view of the technologies and their potential. Behavioral responses to PV self-consumption and the impact on the distribution grid also need to be further studied.
Article
Purpose – The purpose of this paper is to present a case study of the legislative creation of high rise and master planned communities to provide a common basis for future discussions, research and international comparison in the field. Design/methodology/approach – The case study addresses relevant legislation in the Australian state of New South Wales. This has been a model for that in other jurisdictions, including Singapore, the UK and the Dubai International Financial Centre. The legal terms and their significance are discussed in a way that is comprehensible to both lawyers and non-lawyers. Findings – The legislation is shown to have achieved a range of outcomes that are not possible in ordinary Anglo-Australian property law. For example, it has created governing “bodies corporate” which regulate communities with private by-laws and facilitates the continued enforcement of detailed architectural guidelines imposing a master plan. Research limitations/implications – The research describes the legal framework for the creation of communities in a single jurisdiction. More research is needed on the specific way that legal structures hinder or promote satisfactory community living in this and in other jurisdictions. Originality/value – The paper will aid discussions between a range of academics and practitioners working on high rise and master planned communities. It will assist communication between lawyers and non-lawyers, providing a clear description of the significance of legislation in the creation of communities. It will facilitate transnational discussion, as differences in legal systems and inconsistent terminology are a barrier to effective communication and common understanding.
Article
Dynamic pricing holds out the promise of shifting peak demand as well as reducing overall demand. But it also raises thorny issues of fairness. All practical pricing systems involve tradeoffs between equity and efficiency. I examine the circumstances under which equity ought to be allowed to trump efficiency and whether or not this constitutes a defense of flat pricing.
Article
In “The Ethics of Dynamic Pricing,” Ahmad Faruqui lays out a case for improved efficiency in using dynamic prices for retail electricity tariffs and addresses various issues about the distributional effects of alternative pricing mechanisms. The principal contrast is between flat or nearly constant energy prices and time-varying prices that reflect more closely the marginal costs of energy and capacity. The related issues of fairness criteria, contracts, risk allocation, cost allocation, means testing, real-time pricing, and ethical policies of electricity market design also must be considered.1
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