The popularity of Sport Utility Vehicles (SUVs) forced automakers to shift gear to make more SUVs over the past couple of decades. SUVs now account for roughly 50% of vehicles sold in many key markets including the US. No car maker, not even those with legendary brands such as Porche, can survive without serving this growing segment of the market. The same goes for pickup-trucks, which are immensely popular in markets such as in the US. The point is obvious: as consumer demand shifts, the supply must respond.
A similar trend is happening in the electricity sector, certainly in some parts of the world, as more consumers invest in rooftop solar panels, which are increasingly paired with batteries and/or other forms of storage such as electric vehicles (EVs) and electric water heaters which can store the excess solar generation for later use. EVs, with their large batteries, increasingly come with bidirectional charging capability, which means they can store the excess rooftop solar generation and supply the household at night and/or when there is a power outage.
Depending on the specifics, such exotic prosumers and prosumagers are marginally or radically different than the traditional consumers who rely entirely on the delivery of electricity through the distribution network.
A prosumager with 8 to15 kW solar system and a decent size battery and/or a bidirectional EV can be self-sufficient for the most part, easily for 90+% of the hours in a sunny region of the world. Naturally, the net number of kWhs needed from the grid for such a prosumager is minimal. What they need is not very many kWhs but backup and balancing services – a form of insurance – to cover their residual needs such as during prolonged periods of cloudy weather when their batteries run out.
The implications of such developments – which are currently noticeable in few places such as in Hawaii, California and parts of Australia – were extensively discussed in The Future of Distribution and Retail in the Dec 2023 issue of this newsletter. Clearly, both retailers and/or distribution companies need to take note and make adjustments to the changes in customer demand – as automakers did with the surge in the popularity of SUVs, and now the rapid take up of EVs.
But in the electricity sector, the changes in what customers want and need goes beyond changes in how many kWhs they feed into or withdraw from the grid, how often, and when – all important parameters. And since distribution, and in many places retail, are still bundled and regulated, how these services are priced and delivered critically matter.
The debate about how best to serve the customers’ energy service needs, which are diverging, includes virtually all electricity consuming devices on customers’ premises. As electrification efforts gain momentum, virtually all energy use in the residential and commercial sector will be electrified. Hence the question is how best to serve and integrate the myriad of distributed energy resources (DERs) into this emerging distributed energy future.
In this environment, it is not just the nature, quantity, and pattern of services that are changing but the costs of providing them which consist of energy and delivery. For customers who rely on the delivery network primarily for back up and as a form of insurance, a monthly fixed fee would become essential as the volume of kWhs delivered drops. For example:
- How much should a full-service consumer who uses 1,000 kWhs per annum pay once he/she becomes a prosumager and reduces net consumption to, say, 100 kWhs?
- How much compensation does the same prosumager deserve if he/she agrees to have the solar generation, battery and EV storage managed by a third party or the distribution network operator?
These are no longer hypothetical questions as further explained in the following article.
This article originally appeared in the January 2024 issue of EEnergy Informer, a monthly newsletter edited by Fereidoon Sioshansi who may be reached at [email protected]"