The capacity tariff – those who cause high peaks pay more
What is the capacity tariff?
On January 1, 2023 (the date is still subject to change), electricity bills will change for everyone living in Flanders with a digital meter. An important factor here is the introduction of the capacity tariff – an initiative from the Flemish Electricity and Gas Market Regulator (VREG). With the new tariff, grid operator Fluvius will allocate greater weight to peak consumption. In other words, the less burden you place on the grid, the less you pay for energy distribution costs.
Why is the capacity tariff being introduced?
We're moving towards a greener, carbon-free society. Among other things, this means that we'll increasingly use electricity instead of fossil fuels to heat our homes (heat pumps) and for transport (electric cars). As a result, we'll use the distribution grid more and in other ways, which in turn ensures higher peak loads and may overburden the grid. To combat this effect, distribution operators must make significant investments. Take the example of thicker cables for distributing electricity – they cost billions of euros, which would make electricity unaffordable for Flemish families and businesses. In order to prevent this situation, the regulator wants to encourage everyone to make efficient use of the electricity grid. The capacity tariff will ensure that those who cause high peaks will pay more than those who spread their consumption out. It is important for anyone who has items that are considered heavy consumers, such as a heat pump or an electric car, to spread their use and ensure smart operation.
Consumption peaks must trend downwards
The challenge is to try to flatten out consumption peaks as far as possible. Think of it like a dam and a river. In both cases, the amount of water flowing through each day is the same. However, whereas a dam allows a lot of water to flow through in one go at certain times, this flow occurs at a constant pace in a river. This is why we need to use the capacity tariff to convert our electricity consumption from a dam to a river. Today, the difference between consumption during the day and at night amounts to no less than 3,000 megawatts on average – a huge figure when you consider that the Vilvoorde gas power station only produces 400 megawatts and the Doel 1 and Doel 2 reactors only generate 500 megawatts each.
What is listed on your bill? Our electricity bills are made up of various costs: energy costs, grid tariffs and taxes. The largest part of your bill, the energy costs, depends on how much you actually use. The capacity tariff only relates to part of the grid costs, which include the costs of installing, managing and maintaining the electricity grids, the costs of transporting and distributing electricity and more. At present, the grid tariffs amount to 18% of the total bill for an average family. Today, grid costs are calculated based on your overall consumption: the higher your consumption, the higher the grid costs you will pay. With the capacity tariff, you'll pay part of the grid tariffs based on the capacity you use.
To be clear, the capacity tariff is not an additional tariff – it is simply another way of distributing the grid costs across all consumers. The largest part of the bill is therefore still based on the number of kilowatt hours (kWh) that you use. It's clear that being energy-efficient pays off in the long term.
The new capacity tariff will only apply in Flanders. Brussels and Wallonia are excluded from the tariff. This arrangement has been in place for companies for several years now, but the system will now expand to households. However, the tariff can only be applied to users with a digital meter.
Day and night tariffs to disappear The distinction between day and night tariffs will disappear with the introduction of the capacity tariff. For the energy system, it's important that the supply and demand of electricity are constantly in balance. The day and night tariffs were created to make sure this is the case, with consumers being encouraged to use electricity at night. Yet the energy landscape has since been in a constant state of flux. We are increasingly generating electricity on a local level, often through renewable energy sources such as solar and wind. The distinction between day and night tariffs is no longer a good fit in the current climate. Consumers no longer feel the need to use energy in sunny or windy periods and when large amounts of electricity are available. It also makes little difference to the distribution grid operators whether consumers use energy during the day or overnight, as the costs for laying and maintaining the grid remain the same. To ensure the grid tariffs reflect the costs in an appropriate manner in a changing energy landscape, the cheaper night tariff and the more expensive day tariff will disappear from January 2023. This, too, will only have an impact on the grid costs, and not on the energy costs. Energy suppliers can therefore continue to offer contracts with different energy prices for day and night consumption.
Establishing peak consumption As with an average speed check zone, a digital meter will calculate the average energy consumption. The quarter in which the highest average peak is reached will then be analysed. The capacity tariff will charge the amount for this quarter, so you can make gains by levelling off your consumption peak and increasing consumption during off-peak hours. The lower the peak, the less you will have to pay on your electricity bill for that month.
Will you see savings on your bill? This may be the case if you spread your consumption. Refrain from using appliances or devices as often that are the biggest contributors to your high peaks, which in the first instance are those that demand a high capacity over a long period of time (such as a heat pump or an electric charging station). If you choose to spread the use of your charging station, you may be able to save on costs. In any case, you certainly don't have to give up on comfort or consign your daily schedule to the bin. Most household appliances can be turned in line with your usual routine, which won't have a huge impact on your highest peak. If you've got some appliances or devices that you can use at any time, such as a washing machine or drying cupboard, try to use them during lower periods of consumption. If you turn this into a habit, you can make some savings.