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Time of use

Proposal to ACM: time of use grid tariffs

A higher tariff for grid use at times of high grid use, and a lower tariff for times when the electricity grid is used less.

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That is the essence of the proposal to adjust the tariff system for large-scale consumers connected to the national high-voltage grid, which Netbeheer Nederland submitted to the ACM. Time of use grid tariffs are expected to encourage flexible use of electricity, thus contributing to more efficient use of the grid.

Deployment of time of use grid tariffs stems from the National Grid Congestion Action Plan (LAN), in which a broad group of stakeholders is working together to reduce grid congestion. As this proposal concerns large consumers connected to the (extra-)high-voltage grid, TenneT has taken the lead in formulating a proposal for the adjustment to the tariff system in consultation with the sector. The ACM will assess and, if necessary, adjust the proposal before it is included in the Electricity Tariff Code, the regulation for grid operators and grid users. In doing so, the ACM expects to publish a draft decision by March 2024 for interested parties to submit views. The ACM will then adopt the code change in the final decision.

Better utilisation of grid capacity

The proposal for time of use tariffs is another step towards better utilisation of the total capacity of the electricity grid. Grid congestion is a major challenge in the Netherlands; yet the limits of grid capacity are reached only a limited part of the time. Better distribution of the grid load can reduce congestion and provide space for new connections. Efficient grid use also leads to lower grid costs that are ultimately paid by connected parties.

The current transmission tariffs for the (extra-)high-voltage grid depend only on the peak consumption of an individual connected party, but the timing of this peak consumption of large consumers have become an increasingly important factor in the overall grid load. With increasing congestion on the grid, load during peak moments causes more costs for grid management. Moreover, more grid space has to be kept free to accommodate precisely these peaks.

Avoiding peak load

With the time of use tariffs for large consumers in the grid operators' proposal, the moment of grid use also determines the level of the transmission tariff. The pricing mechanism gives large-scale consumers the incentive to reduce electricity consumption during the busy moments of the day. In particular, flexible use - such as batteries - can respond well to this. The grid operators propose a static system: the system defines at which times the costs for grid use are lower or higher. This is simpler than a dynamic system, which would require more process and ICT adjustments from both grid operator and connected parties.

Practice should show the effect of this system adjustment on better utilisation of the electricity grid.