The most prominent distributions tariff's classification is the distinction between capacity tariffs and volumetric tariffs. 

F4BBA90B 9F64 46F6 B2F7 453B5896C069This differentiation is based on whether tariffs are levied on a MW/kW (capacity) or MWh/kWh of consumption (or production).

Although most EU Member States currently charge grid costs through volumetric grid tariffs, European Distribution System Operators (E.DSO) recommend partial switch to the kW-based system.


According to the EU DSOs, shifting from kWh-based towards kW-based network tariffs is reasoned by the fact that the kWh-component of network tariffs rises artificially the value of self-produced (e.g. solar) kWhs, which makes it more attractive to produce your own electricity.


With more self-production, the amount of energy taken from the grid decreases, and besides the decrease of network losses (which is a relatively small effect), the costs of the network do not decrease, since they are mostly fixed, and the network is still needed for periods of low self-production.


These network costs need to be covered with less kWhs, so the kWh-tariff has to increase.


Then it will be even more attractive to invest in solar panels to produce your own kWhs.


In that way the kWh-tariff will spiral upwards as more and more customers adopt self-consumption, or the network cost-recovery will spiral downwards.


DSOs conclude that the kWh-based network tariff component “has a kind of perverse incentive”.