Developing Prosumer Business Models
With the continuing reduction of subsidies for new renewable generation across Europe, new business models for prosumers are paramount if we are to maintain the levels of growth we have seen so far.
I recently attended a virtual workshop on redesigning the future of prosumer business models. As part of the workshop there was a discussion around our local energy system vision for 2050: in an ideal world what would local, decentralised energy look like in 2050? This prompted a range of ideas to be discussed ranging from technology advancement to new regulations incentivising decentralised energy. This conversation has allowed me to reflect on a few key aspects that I believe will lead to successful local energy systems by 2050.
Incentives over subsidies
During the workshop there was great debate over the necessity of subsidies to ensure local energy systems thrive. On the one side the overall trend of countries removing subsidies suggested that they are no longer needed, with traditional markets providing enough value (solar PV is a good example). On the other side, there is an argument that to ensure the momentum of local energy systems subsidies need to continue. These are both valid, however; if local energy systems are to truly become part of the wider energy system they need to be profitable in their own right.
Delta-EE’s Local Energy Systems Research Service is identifying and developing business models that allow local energy systems to create sustainable value. Any incentives should be market based, reflecting their value to the energy system, the environment or society as a whole. The UK smart export guarantee for example replaces the explicit subsidy mechanism of a feed-in-tariff with a value based on its contribution to the energy system.
Agency over autonomy
By their very nature local energy systems stimulate ideas around individualised generation and control over one’s energy. This may resonate with early adopters. However, for the vast majority of the population, the desire to control one’s own energy system to the minute is not there. Quite simply, people’s lives are busy enough without having to worry about 15-minute trading intervals.
That said, that does not mean individuals want to be overlooked and ignored. Rather, by 2050 local energy systems should be able to provide customer with greater levels of agency over their energy. Would they like a time-of-use tariff, 100% renewable energy or the ability to trade with a neighbour? These choices should not necessarily require an individual to slave over an application, rather they should enable customers to have a choice - a voice in their own energy use and the system in which they are part of. The local energy marketplace led by Centrica in Cornwall for example reflects the value of demand side flexibility to optimise the local network without any need for customers to engage on a continuing basis.
Integration over isolation
By 2050 there is likely to be myriad new technologies available to help us decarbonise our energy systems be that a greater choice of electric vehicles, or heating systems that can be used for demand response. Nevertheless, if these new technologies are not integrated both on a household level but also on a system level then their effectiveness will be limited. This extends to all types of local energy systems, from microgrids to local energy marketplaces.
And so, alongside technological innovation, we now need to develop, in parallel, market mechanisms which effectively incentivise and optimise value-creating consumer behaviours. Perhaps the EDF trial in Brixton, which engages consumers in peer to peer trading, or the Reflex Project in Orkney represent one evolutionary path of local energy system? There is almost no limit to the ways in which transactive energy can help to optimise our future energy system.