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Rise of the Prosumer: Will Homeowners Ever Be More Important Than Power Plants?

Home and Grid Efficiency

A lot of people in the energy business are making predictions about what the future of electricity service will look like. Although scenarios vary considerably, most agree that consumer choice will be one of the biggest factors changing the way power companies deliver service over the next decade.

Speaking at GTM’s Grid Edge Live conference this week, utility expert Paul Di Martini said he thinks electricity delivery will eventually be a “highly personalized, highly automated” process that will include different service options based on reliability needs, behavior and consumption patterns, and demands for specific types of renewables.

Opower CEO Dan Yates compared the consumer-focused shift to the retail banking sector, which has seen a dramatic change in the way financial institutions market customized products to customers. In Opower’s world, utilities would remain in control and the grid would stay roughly as it is today, but consumers would have a more customized experience.

SunPower CEO Tom Werner is much further to the left on the spectrum of change. He’s betting on a future grid filled with solar and batteries, and believes the shift will be even more dramatic for a subset of consumers: “In the next five years, customers are going to decide what they pay the utility,” he said.

It’s clear that a surge in distributed technologies that empower the customer — creating so-called “prosumers” — are set to throw the traditional power delivery model into disarray. But predicting where the utility-customer relationship is headed is still a guessing game.

Wilson Rickerson, CEO of Meister Consultants Group, thinks the outcome is much less clear than predictions would suggest.

“We’re certainly headed for something, but I’m not sure anyone knows what that is,” he said. “There’s often a missing middle in these discussions.”

Rickerson is the lead author of a new report looking at how policymakers and regulators may react to the surge in residential prosumers, a trend currently pushed by solar PV and, possibly soon, battery storage.

Many consider the dominance of distributed renewables to be an inevitability. Deployment and cost trends in solar would suggest the technology is on the right path. But Rickerson isn’t convinced the outcome will necessarily favor the prosumer, largely because policy support is still so important for shaping how markets evolve.

“On the one hand, it is unlikely that PV prosumers will scale up in the near term without the right mix of national conditions and policy support,” wrote Rickerson and his co-authors. “On the other hand, policy makers and other stakeholders should not assume that the emergence of PV prosumers can be fully predicted, managed, or contained given the possibility that non-economic drivers might push the market to a ‘tipping point.'”

A prosumer could be any type of solar owner feeding electricity directly to the utility, using it for self-consumption, or defecting from the grid completely.

One of the assumptions behind predictions about a prosumer revolution is that “socket parity” — the point that self-generation becomes cheaper than retail rates — will bring rapid and massive adoption of solar. Compelling economics will undoubtedly create a surge in adoption, but other factors play an equally important role. Many consumers will avoid buying solar due to distrust, perceived inconvenience or lack of knowledge. And, more importantly, sound grid interconnection laws and permitting need to be in place to support the generation, even on an unsubsidized basis.

“Socket parity on its own does not create the conditions for prosumer scale-up,” concluded the report. As skirmishes over state net metering laws suggest, the debate about enabling policies that allow solar and batteries to connect with the grid has only just begun.

And despite all the talk about remaking the utility business model, there are virtually no comprehensive plans from regulators or governments anywhere in the world for dealing with a prosumer paradigm shift, said Rickerson. A number of organizations have created strategy documents, such as America’s Power Plan in the U.S., but very few legislators or energy commissioners are thinking big about the implications of a world dominated by prosumers.

Regulators in New York and Massachusetts who are crafting long-term utility reform plans to embrace the trend are an exception to the rule in the U.S.

“Now that this is really happening, it’s unclear that policymakers are sure of what they’re doing,” said Rickerson.

That could create two scenarios as prosumers become more important. One is that grid enabling policies are neglected or rolled back due to fear — a very real possibility that could hamper cheap solar. Another is that a surge in solar or batteries takes utilities by surprise and causes some variation of the utility death spiral currently causing turmoil in Germany’s electricity markets.

Many in the solar sector believe the second scenario is likely in the near future. But Rickerson thinks there are too many policy and adoption factors in play to guarantee that scenario.

“It certainly seems possible. But aside from a few countries, it doesn’t appear to be a revolution anytime soon,” said Rickerson.

Will policymakers get out in front of the issue before it actually becomes a revolution?

Photo Credit: Prosumer Home Efficiency/shutterstock

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