Time-based electricity tariffs - an innovative and appropriate solution for e-mobility

22 Feb 2021 / Market

E-mobility is on the rise across Europe. In Germany, the Federal Motor Transport Authority logged over 43,000 newly registered electric vehicles (EVs) in December 2020, a record high. The continued growth of EVs means that more flexible appliances need to be integrated into the grid. This additional demand, coupled with the increasing importance of decentralized, green energy generation, poses major challenges for the power grid. What is the most future-proof instrument to meet this testing situation? In Germany, discussions are underway. This blog considers the options.



Peak shaving - a rigid, outdated instrument

Hoping to better manage demand in accordance with the volatility of renewable energy production, the German Federal Ministry for Economic Affairs and Energy presented a draft bill for an updated iteration of paragraph 14a of the Energy Industry Act in December 2020. The Steuerbare-Verbrauchseinrichtungen-Gesetz (roughly translated as the law for flexible appliances) proposed peak shaving as a solution for taking pressure off the grid during times of high demand.

Peak shaving means that grid operators can protect the power grid in times of high electricity demand by switching off charging processes without warning. Under the German proposal, consumers would be free to decide whether they want to allow such interruptions. If they're fine with peak shaving, they would be offered a grid fee saving by the grid operator. Those who decide they don't want to take the risk of a sudden, unannounced interruption of charging processes would have to pay more.  

Peak shaving is punitive rather than encouraging. It does not inspire consumer behaviors that are conducive to stable grid operation. That's why many parties, including the German Association of the Automotive Industry and consumer protection advocates, opposed the introduction of such a rigid instrument. Their arguments proved too strong, and the draft law was subsequently withdrawn.

Time-based network charges - a future-oriented alternative 

Instead of disenfranchising consumers and abruptly intervening in their electricity consumption, the introduction of time-based network charges can encourage consumers to behave in a network-friendly manner. 

Both time-based network charges and the cost of electricity are adjusted in line with electricity demand, enabling cheaper tariffs at night or during off-peak times than in periods of high demand. They encourage customers to behave in a way that is beneficial to the grid. Time-based network charges are a market-oriented and innovative alternative to peak shaving. Flexible electricity prices have already been introduced in Spain, Denmark and the UK, proving that this method can be implemented in practice.

In the future, it would also be conceivable for EVs to be used as electricity storage. They would charge during times of comparatively low demand or high electricity production from wind and solar power, then return electricity to the grid in times of high demand. Customers become flexible consumers who help stabilize the grid and save money in return.

Outlook - where do we go from here?

The German Economy Ministry has withdrawn its draft bill. Given the upcoming federal election, it's still unclear whether a new draft can be expected soon and, if so, whether it will be approved by the Bundestag. The vehement criticism and unanimous demands of consumer protection advocates and industry players have made it clear that Germany needs a future-oriented solution that works for e-mobility and renewables as a whole. Variable grid charges allow storage facilities to be used to serve the grid. They ease loads on the grid and make some base load power plants unnecessary. Decarbonizing transportation and the energy transition should be seen as opportunities, while digitization should be used to enable an intelligent, efficient and safe power grid.

If you're interested in learning more about how time-based tariffs can fit into your portfolio, please contact us. Not ready yet? Take a look at our smart tariffs offering and stay in touch on LinkedIn.

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