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Introduction
The RACE 2030 H4 Theme ‘Rewarding flexible demand: Customer friendly cost reflective tariffs and incentives’ aims to develop and demonstrate innovative, flexible and dynamic pricing and incentives for households. 1 It aims to accelerate their adoption and so support the effective deployment and operation of distributed energy resources (DER) including solar PV, batteries, controllable loads and smart appliances. This can provide benefits directly to households (by reducing electricity bills and fulfilling other values) as well as system-wide impacts that benefit other households, such as reduced wholesale spot prices, reduced network peaks and the provision of ancillary services. This Opportunity Assessment focuses on the following priority challenge areas that were identified through previous consultation with RACE for 2030 partners. 1. Behavioural and social reactions of households to new tariffs and incentives 2. Household support tools 3. Tariff design It is arranged as follows: Sections 2 to 5 describe the current state of play with respect to available markets for flexibility, tariffs and other incentives available to households, the mechanisms that can be used to provide flexible response and the tools available to support customers in decision-making around uptake of and response to incentives. Sections 6 to 8 present the barriers to flexible incentives and how these are being addressed by research and industry development activities and analyse the gaps in this research in order to develop a research roadmap for the H4 theme. Section 9 describes an assessment of the potential financial value of household flexibility. Section 2 ‘Because enabling technologies are an important contributor to flexibility capital, there is (or should be) a close interrelation between the types and availability of these technologies and the design and implementation of incentives, with the two sometimes bundled together to create flexibility products and mechanisms. Design and deployment of both incentives and technologies are, of course, strongly influenced by regulation. Feedback from households is an important consideration in the design of incentives, technologies and mechanisms. The framework suggests that the multiple influences on household uptake and response will preclude ‘one-size fits all’ tariffs and incentives. Successful incentive design requires segmentation of households according to their available loads, capacity and values. It is incumbent on utilities to provide flexibility opportunities that align with household abilities and opportunities to respond. Markets for residential electricity flexibility’ provides a summary of the existing and potential markets available for households to provide electricity flexibility 2. Section 3 ‘Tariffs and other incentives’ details the available network and retail tariffs, as well as their current level of uptake. It also discusses other financial incentives for flexibility and a range of non-financial incentives that can tap into household motivations and values. Section 4 ‘Mechanisms for electricity flexibility response’ describes the various mechanisms used to respond to tariffs and other incentives. These include energy management behaviour, Battery Management Systems, Home Energy Management Systems, Direct Load Control, Controlled Load, Behavioural Demand Response and Virtual Power Plants.
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We refer to “households” (which are dynamic and multifaceted and subject to multiple influences) rather than “customers” (who are singular and defined by their relationship with the retailer or whoever else is selling them a product).
Electricity flexibility includes any change to end-user electricity use (demand or export) in response to a signal, including tariffs.
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Opportunity Assessment – H4: Rewarding flexible demand: Customer friendly cost reflective tariffs and incentives
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