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The Future Of Electricity Retailing: Free kWhs With A Catch

Fereidoon P. Sioshansi, Ph.D.'s picture
President, Menlo Energy Economics

Dr. Sioshansi is President of Menlo Energy Economics, a consulting firm based in San Francisco, California, advising clients on the rapid transformation of the electricity sector and emerging...

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  • Jan 6, 2022

Everybody knows that today’s customers – including those buying electricity – have many choices that were not available until recently, and with rapid technological innovations, they will have even more options to choose from in the future. For electricity consumers who have a roof, the most obvious and prevalent option is to self-generate by installing solar PV panels on the roof. Australia, a country of 25 million, for example, already has over 3 million solar roofs – far ahead of California, or Germany with much larger populations. This means that 3 million Aussie consumers have become prosumers – many of them net generators of kWhs on an annual basis. Anyone in the electricity retailing or distribution business better take note.

On many sunny Sunday afternoons in South Australia, rooftop solar generation meets virtually all the demand on the network. The Australian Energy Market Operator (AEMO) projects the number to rise to 6 million by 2030, roughly 1 in 2 households. Prosumers are for real and will surely multiply over time, and not just in Australia.

As the cost of batteries and other forms of storage – say in electric water heaters – continue to decline, many prosumers will become prosumagers by investing in distributed storage (Box). Recent surveys in the US indicate that growing numbers of those who are interested in installing rooftop solar are also considering storage. And of course, electric vehicles (EVs) are nothing but storage-on-wheels.

The world’s biggest battery? Apparently not in Moss Landing

If you do a Google search for the world’s biggest battery, you are likely to find the 300 MW energy storage system at the Moss Landing power plant in Monterey County, California.

But the correct answer, according to the California Solar and Storage Association (CALSSA) may be the aggregated capacity of consumer-owned energy storage systems within California investor-owned utility service territories – and the correct size is 721 MW and rising. If only these dispersed batteries could be remotely monitored and managed, they would represent a 721 MW virtual power plant

What is more stunning is the rapid pace of growth of distributed storage. According to CALSSA, over 300 MW was installed since August 2020 in California alone, 20+ MW a month. So far, there are 62,000 energy storage installations at homes and businesses throughout the state. And we are not even counting the EVs. 

Connecting the dots and extrapolating suggests that ever larger numbers of consumers will become semi-independent actors in the utility sector, no longer passive and totally dependent on upstream generators delivering kWhs through the distribution network. But the disruption of the traditional relationships between the generators, distribution companies, retailers and customers does not end there. For example, customers can 

  • Trade with their peers; 

  • Form micro-grids or join energy communities; and 

  • Enabled by smart aggregators, become active participants in virtual power plants (VPP).

These developments offer multiple opportunities to disrupt the traditional electric utility value chain. Finally, and perhaps most consequential, is the fact that just as the cost of generating kWhs from renewables continues to fall, the value of demand flexibility continues to rise.

Consequently, we find retailers and distribution companies in places with high concentrations of prosumers and prosumagers such as in Australia and California, who are willing to offer customers virtually “free” rooftop solar panels plus storage in exchange for the opportunity to manage when the batteries are charged from the excess solar generation and when they can be discharged to feed the stored energy back into the grid. This only makes sense when the value of demand flexibility is high and the cost of renewable generation low – conditions prevailing in many jurisdictions.

Solar PVs on every roof, an EV in every driveway

As noted in an 11 Oct 2021 post by Andrew Campbell, when Bill Gates started Microsoft, he imagined a future where there would be “a computer on every desk and in every home”. Gates’ vision largely came to be, and the rest, you can say, is history.

According to Campbell, “Now the state’s electricity sector could be undergoing a similar decentralization. Over 1.2 million California households and businesses currently produce electricity from their own solar systems. Another million customers have agreed to adjust their electricity demand when called upon by the grid operator through demand response programs. The drivers of the state’s electric vehicles could participate in similar programs in the future.”

The California Energy Commission (CEC) forecasts that from 2019 to 2030,

  • Behind-the-meter solar generation will grow by 260%;

  • Customer-sited energy storage will jump 770%; and

  • Electric vehicle electricity consumption will grow by 370%.

Needless to say, these are distributed energy resources (DERs) that can be remotely monitored and managed, potentially reducing “… the need for the traditional centralized grid with all of its power plants, wires and other equipment,” Campbell writes.

In anticipation of these trends, the California Public Utilities Commission (CPUC) is updating regulations to “… enable a more distributed energy future. The rules will govern how the future grid is planned and how much distributed resource owners get paid, or save, for their contributions.”

Among the measures under consideration are “… new approaches to coordinating investments and operations on the distribution grid,” including “… some radical, or innovative, ideas, such as restructuring the utilities and creating independent Distribution System Operators (DSOs),” where the DSO “… would assume responsibility for planning and operations of the local grid” and “…  facilitate markets where DERs provide circuit-specific demand reductions, voltage support, or defer grid investments.” n

As reported in the Nov 2021 issue of this newsletter, an example of such future possibilities is being tested in a smart solar and battery storage demonstration project in New South Wales (NSW), Australia with Ausgrid, a regulated distribution company, collaborating with Reposit Power, a technology provider.

The duo aims to create and manage a virtual two-sided market, where services are bought from distributed energy resources (DERs) on the customer-side of the meter such as rooftop solar, storage devices and EVs without raising the costs to customers without such gadgets. The experiment is expected to include 1,000 Ausgrid households.

Customers investing in at least 6.6 kW of solar plus 11.8 kWhs of battery storage are offered a no electricity bill product for 5 years if they agree to have a control device installed on their premises, remotely monitored and managed by Reposit. The initial investment is estimated around AUD$18,000 (US$13,000), not an unreasonable amount for 5 years of zero electric bills on an all-you-can-eat arrangement.

If you don’t think that is good enough, EnergyAustralia is offering an even better deal: solar and storage without any up-front cost. The company will install, maintain, monitor and optimize each household’s energy consumption, generation and storage as reported in a 7 Oct article in the Renew Economy.

According to Mark Brownfield, EnergyAustralia’s chief customer officer, “When it comes to getting solar and batteries it can be hard to know where to start. It’s complicated, confusing – not to mention expensive. With our Solar Home Bundle, we’ll do the hard work for you.”

“We trialed the offer initially to a small number of people to see if we were on the right track. We were – they loved it, saying it felt like it was too good to be true. They were looking for a catch, but there wasn’t one,” he added.”

“Homeowners … pay a discounted rate for their usage, regardless of whether it comes from the grid, solar or battery. And the usage rate won’t increase while they’re on the seven-year plan.”

According to Renew Economy’s estimate, over the 7 years, a customer using the stipulated minimum of 7,500 kWh a year would pay around AUS$2,500 (US$1.800) a year for the battery, inverter, solar system including installation and maintenance plus grid access and electricity – and wind up with the solar and battery system at the end. Not a bad deal.

What’s in it for EnergyAustralia? First, it makes the customers sticky – they are unlikely to want to switch suppliers for at least 7 years, if not longer. Second, the participating customers will be turned into flexumers, that is customers with flexible and/or manageable demand, which are far cheaper to serve.

What is the catch – there always is one, is there not? Meeting the eligibility criteria. To be eligible, customers must have neither solar nor a battery already installed; must own and have lived in their home for at least 6 months, have an average daily electricity usage of 21 kWh or more and; live in an eligible NSW postcode. EnergyAustralia knows who it wants in the scheme and where.

As noted by Bruce Mountain, director of Energy Policy Center at the Univ. of Victoria in Melbourne, “… the offer by one of Australia’s largest energy retailers to install a battery and PV at a home for $0 outlay by the homeowner is noteworthy. They will charge the household at the default rate for electricity consumed at the home; and for 7 years they have the right to dispatch the battery as they see fit. At the end of the 7 years, the battery and PV system is the customers to keep, no strings attached. It blows my mind.”

He is not alone. After experimenting on small-scale pilots, the retailers (and distributors) have discovered new viable business models that are win-win-win. The one by EnergyAustralia is too good to be true and is likely be over-subscribed.

According to Mountain, however, EnergyAustralia got there second – they copied an offer by Nectr – a retail market offshoot of Hanwa, the Korean solar panel company, with details at

As it happens, others are experimenting with similar offerings including MCE in California – all come with strings attached (box).



Me too: American retailers and distributors are also offering innovative service options

Retailers, community choice aggregators (CCAs) and regulated distribution companies across America are also beginning to introduce new innovative services never offered before. Most work with solar and storage developers to remotely monitor and control behind-the-meter devices during times of peak energy usage.

For example, MCE, formerly Marin Clean Energy, and National Energy Improvement Fund (NEIF) have introduced a new scheme to San Francisco Bay Area residents to finance home energy storage systems. The virtually zero-interest loans, coupled with generous payback periods, reduce financial barriers that could otherwise prevent widespread access to cutting-edge energy storage technology. Participants in MCE Energy Storage Program get:

  • 0%/10-year financing for income-qualified residential customers; 

  • 2.5%/10-year financing for other qualified residential customers located in disadvantaged or low-income communities, high fire threat/outage-prone areas, or who have a medical condition requiring a continuous supply of electricity; and 

  • 5.5%/5-year financing for all other residential customers.

Additionally, the participants get bill credits of $10/mo. for each 20 kWh of storage installed, up to a maximum of $20/mo., along with up-front funding from $1,500-4,500 based on customer qualification. Some customers get additional support from California’s Self Generation Incentive Program (SGIP). 

In Utah, Rocky Mountain Power (RMP) pairs distributed solar with storage in a partnership with battery manufacturer sonnen and ES Solar, a solar PV installer, to retrofit thousands of solar homes.

Following the success of the Soleil Lofts development, a housing community built to provide flexibility to the grid, RMP is offering incentives for its existing 50,000 solar customers in Utah to add a battery system that can work with sonnen's virtual power plant software. The Wattsmart Battery Program is expected to provide RPM with flexible distributed capacity that can be dispatched similar to how peaking plants are.

RMP has been working with sonnen to develop distributed energy resource (DER) products that can be aggregated and utilized on the distribution grid, according to Bill Comeau, RMP's vice president of customer experience. The schemes integrate DERs "directly into our energy management system ... providing grid and voltage support and frequency response." n

On a broader level, it is clear that the continuously improving economics of solar + storage + AI-enabled aggregation/optimization is leading to new and innovative business models. Perhaps “too cheap to meter” will soon be upon us? Perhaps this editor’s ideas about prosumagers turning into nonsumers and flexumers are becoming feasible and scalable – even if they come with a few strings attached. To many observers, these trends promise to alter the traditional relationships of some consumers with their electricity service providers and this will have significant implications, including rethinking by the regulators on how different types of customers will pay for the services they receive from the network.

Some of the topics covered in this article were presented in a 15 Nov 2021 webinar jointly organized by the Florence School of Regulation (FSR) and the International Association for Energy Economics (IAEE), available at n

This article originally appeared in the December 2021 issue of EEnergy Informer, a monthly newsletter edited by Fereidoon Sioshansi who may be reached at"


Matt Chester's picture
Matt Chester on Jan 6, 2022

 the offer by one of Australia’s largest energy retailers to install a battery and PV at a home for $0 outlay by the homeowner is noteworthy. They will charge the household at the default rate for electricity consumed at the home; and for 7 years they have the right to dispatch the battery as they see fit. At the end of the 7 years, the battery and PV system is the customers to keep, no strings attached. It blows my mind

This is truly gamechanging-- it becomes a no-brainer for the consumer, they have virtually no risk and it simply takes reaching and educating the customer. Eager to see this model replicated elsewhere

Fereidoon P. Sioshansi, Ph.D.'s picture
Thank Fereidoon P. for the Post!
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