Grid Tariff Design and Peak Demand Reduction : A Comparative Tariff Analysis with Simulated Demand Response

This paper compares the ability of five capacity-based and energy-based tariff designs to achieve peak demand reductions, and it provides policy recommendations on tariff choice, design options, and demand response potential. Using real electricity consumption data from 3,608 customers in Norway and a simulated demand response, the results show that tariff performance depends on two design characteristics: whether the tariffs target individual or grid peaks and whether peak periods are determined ex-ante or ex-post. We find that energy-based tariffs, such as time-of-use and critical peak pricing, achieve the highest peak reduction but may create new peaks if load shifting occurs