Carbon-aware tariffs could cut Swiss electricity emissions, simulation shows

A new simulation project called Carbon-Aware Pricing has launched a live dashboard to measure how shifting electricity tariffs could reduce CO2 emissions across various power grids. The tool evaluates the potential for decarbonization by comparing standard pricing against models that fluctuate based on the actual carbon intensity of the energy supply.

In a 32-day simulation focused on Switzerland, the project found that a 'Carbon Peak Pricing' model would have reduced CO2 emissions by 3.0% compared to standard tariffs. A second model, 'Carbon-Aware Hourly' pricing, showed a potential emissions reduction of 2.4% over the same period. To establish these figures, the simulation utilizes the ENTSO-E day-ahead clearing price in EUR/MWh for wholesale context, while carbon intensity data is derived from the production-based ENTSO-E generation mix.

The shift from demand to intensity

Traditional electricity pricing typically relies on Time-of-Use (ToU) models, which focus on peak demand periods to maintain grid stability. However, these models do not account for the actual cleanliness of the energy being produced at any given moment. Carbon-aware pricing shifts the incentive from avoiding peak demand to avoiding peak carbon. By making electricity more expensive when the grid relies on fossil fuels and cheaper when renewables like wind and solar are abundant, the system encourages users to shift their consumption to the cleanest possible hours.

Implications for grid decarbonization

As power grids integrate a higher percentage of volatile renewable energy, the carbon intensity of electricity fluctuates sharply throughout the day. Implementing pricing that reflects these fluctuations provides a mechanism to automate demand-side flexibility. This approach allows the energy sector to reduce its overall carbon footprint by optimizing existing resources, potentially reducing the immediate need for massive capital investments in large-scale battery storage to bridge the gap between renewable generation and consumption.

Future outlook

While the Switzerland simulation provides a proof of concept, the broader application of these tariffs depends on the willingness of regulators and utility providers to move away from static pricing. The project continues to track the impact of these models across different grids to determine if the 2.4% to 3.0% reduction seen in Switzerland is a consistent trend globally. It remains to be seen how consumer behavior will respond to carbon-based pricing in a real-world retail environment compared to these simulated models.