Direct and indirect electrification from intermittent renewable energy sources are key pillars of the green transition. Yet, they pose challenges to the energy system and grid regulation schemes as we know them. Therefore, large-scale projects that produce and consume electricity even before entering the transmission and distribution grids hold a great opportunity for society to enable the renewable energy build-out that we need, without adding large capital costs on grid operators for grid build-out to transport and distribute energy.

We find, however, that existing grid tariffs are not fit for large, flexible consumers such as electrolysers, as they do not take into account the (limited) required additional grid capacity stemming from this type of consumers if allowed to be placed in co-location via direct lines between production and consumption of electricity.

We also find that all users could potentially gain from offering large, flexible consumers, like electrolysers, cost-reflective and capacity-based tariffs, which would even provide additional TSO revenue in the short to medium term. In the long term, capacity-based tariffs for all users would induce much more efficient use of the energy system and smoothen grid capacity demand during all hours of the day, which is exactly the outcome we want to limit peak demand – the true driver of grid costs.

Learn more about the topic here.

For further information, please contact Managing Economist, Signe Rølmer Vejgaard.