Qualitative and quantitative analyses of a feed-in tariff

CE Delft was commissioned to conduct a study on the impact of a feed-in tariff. Customers currently pay a transmission tariff for the off-take of electricity from the grid, but not for the feed-in of electricity (such as gas power plants, wind, solar and batteries). The transmission tariff component is the largest cost component of grid tariffs for customers. This study examined six variants of a possible feed-in tariff for electricity, which differ in terms of tariff carrier (kWmax, kWcontract, kWh, connection tariff) and type of incentive (location, time).

Our conclusions for each component of the study are as follows:

• Costs of those feeding-in electricity: The average tariff based on the assumptions in this study is 2.5 €/MWh for those feeding-in electricity, but varies from one party to another depending on how the grid is used. When differentiating by location or time, the spread is wider between what is paid by each type of party or per location. A tariff without an EU cap leads to about four to five times higher costs for those feeding-in electricity.
• Energy mix: A feed-in tariff may reduce the number of renewable energy projects going ahead, causing electricity prices to rise in the short term. This will improve the business case and more projects will be realised. Government policies, such as subsidies, are also expected to drive the achievement of renewable generation targets. In the future, renewable generation is projected to decline to a limited extent, increasing the electricity price by about 1% in 2030.
• Grid load: A feed-in tariff may result in fewer projects, which will have a limited effect on the grid load. A tariff with location control may result in new projects being set up in other locations, although that choice depends on many factors. This could result in a reduction in grid load of 5-15% at stations with many renewable energy projects.
• Energy bill of customers: A feed-in tariff results in lower grid tariffs for customers, but also in a higher electricity price. Overall, this will keep energy costs roughly the same for businesses and households.
• The study included an assessment of feed-in tariff variants. In our view, the feed-in tariff offers a potential improvement on the aspects of cost reflectivity and, to a limited extent, on grid impact: for some variants it also potentially improves the criteria of objective, transparent and non-discriminatory. Areas of concern are the impact on the energy mix, customers’ energy bills, security of supply, the playing field level and the feasibility for grid operators of the more complex tariff forms.

In the coming period, the ACM will continue to work on shaping its vision for the possible introduction of a feed-in tariff.