Residential Energy Prosumers and the Implications of the Emergent Transactional Grid

Residential Energy Prosumers and the Implications of the Emergent Transactional Grid

The concept of the electricity “prosumer” has informed recent energy policies from the United States to the design of the European Union’s electricity markets. Meanwhile, research on smart grids, residential consumers, and their flexibility has asked how people could change their everyday energy use as a result of innovations on this area. This text explores a use case for residential prosumers and how that could inform designs of a transactional power network, with close links to the concept of energy user or “prosumer”.

What is an energy ‘Prosumer’?

Electricity prosumers are consumers that consume electricity and produce it. They may have  their own energy generation or storage technology behind their meters, and use these assets themselves for their energy needs, or for selling energy back to the electricity markets. The concept is broad and can refer to various kinds of individuals and communities; from households with solar panels on their roofs and storage in the garage, to local energy co-operatives, businesses, industries, and public institutions like university campuses.

What impact does the Prosumer have on the energy system?

The prosumer concept is now a significant factor in how we manage energy use to the point that recently, prosumers have engaged energy policy and expert discussions in many parts of world. The European Parliament Research Service suggests that the number of prosumers is rising. It foresees many potential changes in the energy system through prosumer activities: including increasing renewable energy sources, helping finance energy transition, and even reducing costs in the wider energy system, in addition to potential reduction in prosumers’ energy bills. The announced redesign of the EU’s electricity markets has vied for greater appreciation of energy prosumers and the creation of common EU rules for them. The United States Department of Energy, links prosumers with the rise of rooftop solar panels and electric vehicles, sees them as key for spurring innovation and competitiveness in energy provision.

Meanwhile, current research linking to wider literature on households, smart grids and flexible energy use highlights findings also relevant to understanding prosumers. We can outline three important findings from this much wider discussion.

1. Technological and policy “visions” about more active electricity consumers clearly are common. Yet, research tells us that these aims should be brought closer to real-world users in the economy and social context where they actually use energy. For example, instead of just offering consumers innovative energy devices, we should seek to understand how these devices get integrated into everyday life routines.

2. To enable the activities of electricity prosumers, better energy technologies, improved energy systems, and more regular feedback information is necessary. This observation does not just relate to individual consumers, but also the information systems and power grids that they will most probably need to connect to. That is to say, the wider systems have to develop so that they allow the new kinds of energy consumption including prosumers.

3. The third observation looks at the first two together and underscores their difference or complementarities. It asks how much “vision” of prosumers corresponds with actual experiences of being a prosumer.

The difficulty of anticipating how complex systems will be used has been a common problem in economics. When considering the future of complex systems Hayek famously underscored the necessity ”to demonstrate to men how little they really know about what they imagine they can design”. History highlights that the consumer experience and the designer’s imaginings have limited contribution in the design of systems with substantially different operating conditions.

These concerns link with experiences and technologies that are already emerging. By now, a number of real consumers - from rural families in Denmark, houses in the North of England to the rapid expansion of South Australian prosumers - have experimented with producing as well as consuming their own energy. While more evidence needs to be gathered in this respect, these households have changed some of their energy-using activities and acquired new competences according to researchers: constructing new rhythms of life around solar energy or changing their understanding of how residential electricity use might relate to household appliances. Alongside this, emerging technologies, systems, and concepts are addressing the challenges in other technologies, policies, regulation, finances, markets and environmental conditions, around electricity prosumers. This is an area of considerable current innovation. Instances of the alleged “failure” of some prosumer experiments should be a cue for learning, not an excuse to turnaway from the prosumer concept.

Prosumers and transactional grids

A residential use case by Faraday Grid, deploying a power flow control device and transactional energy platform, suggests benefits of being a prosumer. In this case, the house has solar panels and battery storage, both linked to the aforementioned technologies. The system was informed by a specific design: where energy is not understood as a centralized provision, rather where the energy system enables bidirectional flow and each device and agent within it is allowed to act independently. In this system, each device and agent also decides how they use energy optimally, based on current power levels and energy prices. These decisions can be handled by automation with the householder able to set and forget based on price and risk considerations that suit the individual needs. The system also allows households to monitor and adjust their energy use. This, again, depends on agents and devices acting on the local level. The initial system modelling suggests cost savings by an order of magnitude.

Among the key findings in research on technology “visions” has been that visions, expectations, and imaginaries about users can visibly shape or even constrain future technology options and policies. If one assumes that energy users are well-informed and will weigh the costs of new energy solutions, that leads to different options and policies than when these assumptions are not there. Once we take this approach to prosumers, then the questions become how can residential prosumers participate and what new platforms are likely to allow them to do that. The issue of what concepts of the user inform these innovations and policies will inevitably shape the designs of future transactional power networks.