Balancing Environmental Incentives and Fairness in Household Electricity Distribution Tariffs

Adapting energy distribution systems to new patterns of energy generation and usage often creates tensions between environmental and equity objectives by challenging traditional distributional arrangements and associated charging methodologies. We discuss the principles of fairness and efficiency which might be applied to designing tariffs for residential consumers with self-generation opportunities, and identify the main examples of charging methodologies used in practice. Based on this experience, we develop a stylised model to simulate the effects of a wide range of tariff designs on households with diverse energy use profiles and ability to self-generate. We observe a clear trade-off between incentives to self-generate and distributional concerns across tariff scenarios and show how a net metering scheme may aggravate the trade-off.