Work Package 1: Foundations
Description
In WP1, the foundations for the subsequent work packages are established. A review of the legal framework and the literature is conducted to identify cornerstones for alternative design options of grid charges in Austria, an extensive database for the scenario building is compiled, including a survey of grid expansion plans at the transmission and distribution level within Austria. Finally, options for (fair) grid charging are developed and conceptually defined.
Task 1.1. Review of the current design of grid charges in Austria
In this task, we investigate the design of grid charges in Austria at the start of the project and track its changes in the course of the project. Particular emphasis is put on the System Utilisation Charge ("Netznutzungsentgelt"), the Charge for System Losses ("Netzverlustentgelt") and the Charge for System Services ("Systemdienstleistungsentgelt"). Since grid charges in Austria are revised every December for the subsequent year, we analyse the status quo of grid tariffs at the end of 2024 and the end of 2025.
Task 1.2. Review of the literature on the financing of electricity grids
A comprehensive literature review on the optimal financing of grid costs is conducted, including both the theoretical literature and empirical assessments of other market regimes (e.g. volume-based approaches, capacity-based approaches, current policy proposals by the EU and other Member States).
Task 1.3. Compilation and analysis of grid expansion plans / needs
The Austrian Transmission Grid operators (APG, VÜN) are regularly publishing a ten-year forward-looking expansion plan for the transmission grid. We acquire the latest editions, compile related investment needs and derive impacts on the magnitude of possible future grid charges, depending on the underlying allocation mechanism. Additionally, other relevant studies in this area are identified and analysed, focusing on the identification of investment needs related to future grid expansions and reinforcements. We thereby put emphasis on the identification of investment needs at the distribution grid level. A proper starting point for that purpose is a study by Frontier Economics & AIT in 2022, indicating that about EUR 30 billion will be required to make the Austrian distribution network ready for the energy transition (Frontier Economics & AIT, 2022).
Task 1.4. Compilation of other exogenous model parameters
A database on the projected development of exogenous model parameters is compiled based on an extensive survey of the relevant literature – most notably IEA World Energy Outlook, ENTSOE-TYNDP scenarios, Austrian and EU energy and emission scenarios or Renewable Power Generation Costs reports. The database includes e.g. population and labour force projections, renewable electricity potentials, energy efficiency potentials, and fuel and carbon prices, but also information on the cost structure of different electricity generation technologies and electricity grids.
Task 1.5. Scenario development
Based on preceding tasks, alternative options for the distribution of grid costs in Austria are developed. This includes the distribution of costs between the public budget, electric utilities, energy-intensive industries, businesses, and households (differentiating between mere electricity consumers and prosumers). With respect to electric utilities and final consumers, the scenarios cover both pure flat rate approaches, Ramsey-type pricing, volume-based charging and capacity-based charging as well as combinations of these elements.
To investigate the impact of these different tariff designs in a decarbonized electricity system in 2040, we use the WEM scenario by Umweltbundesamt as a baseline for future development. In addition, decarbonization pathways are modelled that reflect a strong decarbonation ambition within Austria (as well as for the whole EU), implying a strong uptake of electricity demand and renewable energy supply alongside sector-coupling and decarbonization of other sectors such as industry and mobility. We can build here on an in-depth modelling exercise conducted in the pre-project SECURES (Schöniger et al., 2023).
The flexibility needs of the electricity system that arise with the ongoing integration of variable renewable energy sources and the increasing electrification of the transport and heating sector can be met with different measures. On the one hand, the geographic flexibility can be increased by grid extension and reinforcement. This is a central approach and might face difficulties in regarding acceptance (NIMBY). However, it enables to transport more electricity from regions with excess production to undersupplied locations. On the other hand, temporal flexibility of the electricity system can be increased by investments in flexible technologies, such as battery energy storage systems (BESS). An optimal dispatch of new and existing flexibility options, including batteries, heat pumps or electric vehicle charging stations, can balance demand and supply locally along the time axis and, thus, might reduce the need for grid infrastructure investments. In this case, the cost of grid expansion might be lower than in the former case. However, it relies on private investments in and optimal operation of decentralized flexibility options, and, hence, suitable incentives are required. These incentives could be provided by dynamic or capacity-based grid tariff design. In this context, two pathways – central grid expansion versus distributed flexibility investments – are defined in this task, resulting in different grid costs that have to be distributed among various actors.
A workshop with researchers and stakeholders from administration, interest groups and NGOs will be organized to discuss potential designs of grid fees and electricity generation and consumption pathways.
