The impact of dynamic electricity tariff on long-run incremental cost

Electricity plays an important role in the future energy framework around the world. The foreseen high penetration of renewable energy resources and electric vehicles (EV) will change the way of understanding and operating power systems. Consequently, significant investment in network infrastructure needs to be made in order to cope with this tremendous change in an efficient and effective manner. Longrun incremental cost (LRIC) pricing method is recognized as an economically efficient approach for pricing network charges, which provides forward-looking information for future investment cost. LRIC evaluation is usually conducted on the basis that demand is passive and uncontrollable. The impact of demand flexibility on LRIC has not been comprehensively studied. In this paper, the effect of dynamic electricity tariff and flexible demand on LRIC and network investment decisions is deeply analyzed and discussed. A modified test system (RBTS) illustrates the proposed method.