On the Dynamics of Distributed Energy Adoption: Equilibrium, Stability, and Limiting Capacity

• Published in: IEEE transactions on automatic control Vol. 65; no. 1; pp. 102 - 114
• Main Authors: Sun, Tao, Tong, Lang, Feng, Donghan
• Format: Journal Article
• Language: English
• Published: New York IEEE 01.01.2020; The Institute of Electrical and Electronics Engineers, Inc. (IEEE)
• Subjects: Adequacy; Adoption dynamics; Death; distributed energy resources (DERs); Distributed generation; Dynamic stability; Economic models; Energy resources; Energy sources; equilibrium; Limiting; Operating costs; Positive feedback; Power industry; Pricing; Regulators; renewable integration; retail tariff; Spirals; Stability analysis; Tariffs
• ISSN: 0018-9286; 1558-2523
• DOI: 10.1109/TAC.2019.2906723

The death spiral hypothesis in electric utility represents a positive feedback phenomenon in which a regulated utility is driven to financial instability by rising prices and declining demand. We establish conditions for the existence of death spiral and conditions of stable adoption of distributed energy resources. We show in particular that linear tariffs always induce death spiral when the fixed operating cost of the utility rises beyond a certain threshold. For two-part tariffs with connection and volumetric charges, the Ramsey pricing, which myopically optimizes social welfare subject to the revenue adequacy constraint, induces a stable equilibrium. The Ramsey pricing, however, inhibits renewable adoption with a high connection charge. In contrast, a two-part tariff with a small connection charge results in a stable adoption process with a higher level of renewable adoption and greater long-term total consumer surplus. Market data are used to illustrate various solar adoption scenarios.