Work

The energy policy pricing dilemma: Affordability, volatility, and market signals in electricity tariffs

Year: 2025

Type: article

Abstract: This paper develops an analytical framework to compare policy outcomes in setting the energy cost component of small consumer tariffs, focusing on its volatile, market-driven nature. It analyzes trade-offs between reducing cost volatility, ensuring affordability, encouraging forward trading, and preserving hourly pricing to promote sustainable consumption. Findings indicate that minimizing volatility, enhancing affordability, and incentivizing forward contracts conflict with maintaining market signals through hourly pricing. Simultaneously reducing cost variance and average cost proves impractical. Using Spain’s 2014 and 2023 tariff regulations as a case study, the study underscores inherent regulatory dilemmas, emphasizing the need to prioritize specific objectives in tariff design.

Source: Energy Reports

DOI: 10.1016/j.egyr.2025.08.006

Authors: Juan Ignacio Peña, Rosa Rodríguez, Silvia Mayoral

Institution: Universidad Carlos III de Madrid

Language: English

Topic: Electric Power System Optimization

Subfield: Electrical and Electronic Engineering

Field: Engineering

Domain: Physical Sciences

SDG: Affordable and clean energy

Open Access status: gold

Estimated APC paid: $3,040