Yes I agree the consumer and tax payer pay for everything in the end.
In the document
"Modelling the Impact of Transmission Charging Options"
On page 13 it outlines the "Current transmission charging arrangements"
Transmission Network Use of System (TNUoS) charges are split 27% from the generation side and 73% from the demand side.
Since I don't know in exact detail how the National Grid charging schemes operate I shall build up a simple model to help me think more clearly about some of the main issues involved...
If you think about the absurd situation where everyone has a grid connection (both generators and consumers) but no one supplies or uses any electricity, then the only source of income can be assumed to be electricity standing charges.
The question is in the absence of electricity flows what should the standing charge element of the electricity bill pay for and should all consumers pay the same standing charge? Should all generators be asked to pay a generator standing charge? Should all generators pay the same standing charge?
If the consumer household has solar panels for example they will during certain sunny periods become a net generator. Should a different generator standing charge apply pro-rata for those periods?
In my simple model (without electricity flows) consumers pay a standing charge, but do not start paying towards the generators standing charge until they start using electricity.
If the standing charge element of the bill for both consumers and generators does not cover maintenance and running costs of all the grid what part of the grid should it cover?
For my very simple model lets assume all the costs (without electricity flows) are covered by the standing charge payments. Lets assume for simplicity all generators and all consumers pay a standing charge proportional to the maximum power they can physically export to the grid or physically consume from the grid (fuse ratings).
Lets assume all costs on top of these standing charges are then marginal and depend pro-rata on the actual energy a generator generates or a consumer consumes.
Now the question arises of how to pay for additions to the grid under the assumption of zero energy flows.
Lets assume a new power generation company asks to be connected to the grid. They ask for two 500 MW maximum power export connections to the high voltage grid.
Who should pay the capital cost of building this connection (without electricity flows) ?
Lets say it is paid for out of the consumer and the generator standing charge payments, which includes an element for expanding the grid on legitimate request.
Now at last we get to use our grid...
The cost per unit of energy generated is lowest when the generator exports at the maximum power allowed by the export connections, i.e. in my example 2 x 500MW constantly.
If the generator standing charge for 2 x 500MW connections is paid independently of how much is generated this means that the cost of generating electricity decreases when the instantaneous power exported increases (the rate at which energy is exported).
The maximum power exported to the grid may be
(a) physically limited on the generator side (e.g. not enough wind)
(b) constraint limited on the grid side
(c) limited by price competition in the electricity market giving access to demand
(d) demand limited on the grid side outside of electricity market
(I am not sure (d) necessarily needs to exist separately to (c). I suppose you would need a very fast electricity market trading system )
All these reasons for limiting exported power in this simple model increase the price the generator has to charge per unit of energy exported. This effectively means that once a generator is exporting to the grid, it is likely to be cheaper for them to increase their power output (if controllable and available) than for another generator of similar type start up and start exporting at low powers.
In this simple model it might well pay for a wind farm and an associated gas backup power station to share the same grid connection(s). Is this something to be encouraged?
In the simple model the transmission losses on the grid are paid say 27% from the generation side and 73% from the demand side, the costs can be paid on a pro-rata basis depending on how many units of energy are respectively generated or consumed.
A simple model such as this can be used as a baseline, so that the benefits and disbenefits of using a more complex model can be clearly and transparently established (like adding demand management).
The question is, is it worth adding the considerable extra complexity of location based energy pricing to my simple model? Which players does location based pricing favour and which does it disadvantage?
I have no idea how the location based pricing models compare with simple baseline models, as they are far too complex for a dummy like me to think about, without a computer and the hours and hours necessary to write thousands of lines of code to model them.