Implementing Dynamic Tariffs for Residential Consumers:A Literature Review

Dhruvak Aggarwal

Council on Energy, Environment and Water,
New Delhi, India
Corresponding Author: dhruvak.aggarwal@ceew.in

Muskaan Malhotra

Council on Energy, Environment and Water,
New Delhi, India

Shalu Agrawal

Council on Energy, Environment and Water, New Delhi, India

Cite this article

Aggarwal, D., Malhotra, M., Agrawal, S. (2024). Implementing Dynamic Tariffs for Residential Consumers: A Literature Review. In Proceedings of Energise 2023- Lifestyle, Energy Efficiency, and Climate Action, pp 298–308, Alliance for an Energy Efficient Economy. https://doi.org/10.62576/YRJK7788

Highlights

  • Discoms must have a deep understanding of consumer attributes before implementing dynamic tariffs.
  • Income, education, household composition, and grid characteristics determine the distribution effects of dynamic tariffs.
  • The decision to adopt new tariffs needs sustained consumer engagement.
  • Technologies can play a pivotal role in helping consumers adapt to new tariffs.

Abstract

Dynamic retail tariffs are expected to be a cost-effective method to integrate variable renewable energy into the electricity grid while leading to higher social welfare. However, the global uptake of dynamic tariffs among residential consumers has been tepid due to complexities in implementing tariffs that match consumer preferences and uncertainties around their distributional effects, leading to unrealized welfare gains for consumers, utilities, and society. With a renewed interest in implementing dynamic tariffs in India following the large-scale rollout of smart consumer meters, this paper reviews recent literature on the attributes that affect the distribution of gains and losses among consumers and influence their uptake of dynamic tariffs. We propose a three-stage implementation framework that starts with getting a deeper understanding of the heterogeneous residential consumer segment and delineates the complementary steps required along with a change in tariff design to increase the likelihood of consumer participation.

Keywords

Dynamic Tariffs, Literature Review, Residential Consumers

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