By our Consultant Robbert Hens

With the new year approaching fast, we deemed it fit to recapitulate what the capacity tariff entails while also providing you with our latest insights. For more information you can always check out our previous article hereFrom January 2023 onwards the Flemish energy regulator VREG will use a new method to calculate the distribution network costs, the capacity tariff. Except for social tariff customers, the capacity tariff applies to every Flemish household or SME with either a digital or classical electric meter.

Where did the idea come from?

The capacity tariff has a long history, dating back to the last century when it was introduced to production companies. These companies typically had powerful machinery and an unpredictable energy consumption. The production processes, however, were controllable and the usage peaks  on the electric grid could be minimized. The chosen tariff structure for these energy consumers was, you guessed it, a capacity tariff. The oldest capacity meter known to Fluvius dates back to 1948, making the capacity tariff nearly as old as my grandmother!

Back then, a capacity tariff did not apply to the average household. Our appliances weren’t powerful and very limited in terms of controllability. Additionally, our energy consumption was very predictable.

Okay, got it, but why us?

Over the years, the way we consume energy has drastically changed.  Solar panels on our roofs, heat pumps in our houses, batteries in our basements, electric cars in our garages, and the list goes on. While this is a positive evolution, this has exponentially increased the strain we put on electrical grid balance.

Our consumer profile has gradually changed. We are now at a stage where the average household has powerful appliances and limited predictability. Our consumption behavior, however, is now more controllable than ever without sacrificing comfort.

How does the capacity tariff impact our energy bill?

A household energy bill can be split into energy cost (39%), levies and VAT (20%) and distribution network tariffs (41%). The latter covers the costs of the construction, operation and maintenance of electricity networks. Up to now, the distribution network tariffs were based entirely on the amount of electricity (kWh)a household consumed: the higher the offtake, the higher the tariffs. From January 2023 onwards a part of the distribution network tariffs will be determined by the network capacity (kW) used: the capacity tariff. This accounts for approximately 18% of a household bill.

The point of reference will be the monthly peak in a household’s power offtake. Those fifteen minutes a month when power consumption is at its highest –  for example because all household appliances are running simultaneously – will determine roughly 1/5 of the electricity bill. The new tariff aims to discourage consumption peaks.

 

Source: Vreg.be

 

Key takeaways 

Capacity tariff only applies on offtake

The capacity tariff applies only to the electricity the customer takes from the grid. Customers with solar panels (and a digital meter) get an injection compensation for the electricity they inject into the grid. They do not pay grid tariffs and therefore they do not pay a capacity tariff on their injection.

The capacity component does not equal a higher cost per month

With the introduction of the capacity tariff, a new component is added to the price calculation: Network capacity (kW). Important to note here is that while a new component is introduced, the cost per kWh drops. For classical meters, this cost will be half of the original and for digital meters, it drops down to 20% of the original cost.

 Capacity tariffs rewards the forerunners

For average to high-consuming households, the tariff impact is limited. In fact, without a change in consumption behavior, the financial impact is virtually identical. However, for those willing to make a change, the capacity tariff only offers benefits. The impact of the capacity tariff on your electricity bill depends on your monthly peaks as well as your consumption. You will certainly pay less from 1 January 2023 if you have a high consumption as well as a low average monthly peak. Families with an average consumption and an average monthly peak will hardly notice the difference in their wallets.

You will certainly pay more if you have a low consumption as well as a high average monthly peak.  In many cases, there is still a vast amount of energy consumption remaining that simply has not been electrified (cooking, heating, transport, etc.).  When all is accounted for, a lot of small consumers are average to high fossil fuel consumers. Further electrification is, therefore, strongly encouraged.

 Want to know the impact of the capacity tariff for your specific situation? Then do the simulation on the VREG website: https://simulatornieuwenettarieven.vreg.be/

 Tips and tricks

 Besides reducing and spreading your usage the following tips and tricks can help you benefit from the new Capacity tariff:

 Compensate your energy consumption using solar panels

If you have solar panels, you can tailor your consumption to the times when you produce your own energy to avoid a higher peak.

Combine solar panels and a home battery

Your home battery can absorb and smooth out your peaks by injecting energy at the times when you are consuming a lot of energy at once.

Electric car? Charge slowly!

Set your charging station to slowly charge your car over a long period. Preferably when you use little energy yourself to avoid a peak

Vehicle-to-Grid & Vehicle-to-Home

At the moment of writing this article, these features are offered on a select few EVs and PHEVs. This will change in the coming years however as many car manufacturers have confirmed that these features will be offered very shortly.

So, now might be a good moment to get acquainted.

Vehicle-to-Grid: EVs or PHEVs can inject power into the grid to balance energy demands and optimize energy usage based on the time of day and utility costs. Sounds familiar, no?

Vehicle-to-Home: EVs or PHEVs can supply power to homes and buildings, effectively turning them into mobile home batteries.

For more information contact Frank Sels our Business Manager Energy & Utilities

Contact him

A challenge is the perfect occasion to transform a problem into an opportunity
Frank Sels Account Manager
The increasement in decentralised green energy production, the electrification of transport and available technologies create many opportunities for energy platforms.
Alex Curtoud Consultant Utilities
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Luc Janssens CEO

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