Abstract for: Myths and realities of the utility death spiral
As the electricity industry is changing worldwide with the advent of Distributed Generation (DG), rapid expansion of DG has sparked debate on the ‘utility death spiral’. This is a reinforcing cycle between solar Photovoltaic (PV) deployment and increases in electricity rates that speed the learning curve of the technology, which results in demand reductions from the utility, with consequential revenue losses and the death spiral of the utility. These effects are matters of major concern to policy makers as they challenge the reliability of electricity systems. These problems require policy and regulation issues – for some, the solution lies in design changes to distribution tariffs. In this context, and given multiple uncertainties, this paper examines the effect of the diffusion of PV technology on the revenues of utilities, under different distribution-tariff designs. The paper proposes a system dynamics model to investigate the effect of different distribution network charges on the revenues of utilities. It is concluded that for the Colombian case, it is possible under certain conditions to avert the utilities’ death spiral by changing tariff design strategy.