Is a Prosumer Revolution Imminent? Residential PV-Prosumers Drivers - - PowerPoint PPT Presentation

Is a Prosumer Revolution Imminent?

Kristian Petrick IEA-RETD Operating Agent IRED 2014, Kyoto, Japan, 20 November 2014

Residential PV-Prosumers – Drivers and Policy Options (RE-PROSUMERS)

www.iea-retd.org 2

The mission of IEA-RETD is to accelerate the large-scale deployment of renewable energies

• Created in 2005, currently 8 member countries: Canada, Denmark, France,

Germany, Ireland, Japan, Norway, UK.

• IEA-RETD commissions annually 5-7 studies bringing together the

experience of some of the world’s leading countries in RE with the expertise

• f renowned consulting firms and academia.
• Reports and handbooks are freely available at www.iea-retd.org.
• IEA-RETD organizes workshops and presents at international events.

RETD stands for “Renewable Energy Technology Deployment”. IEA-RETD is a policy-focused, technology cross-cutting platform (“Implementing Agreement”) under the legal framework of the International Energy Agency Background IEA-RETD

www.iea-retd.org 4

Study on the effects of large uptake of non-incentized residential PV by ‘prosumers’

RE-PROSUMERS

PSG Georgina Grenon (FR, chair), Michael Paunescu (CA), Lisa Dignard (CA), Otto Bernsen (PVPS , NL), Gaëtan Masson (PVPS, OA), Axel Strang (FR), Simon Müller & Cédric Philibert (IEA), Kristian Petrick (IEA-RETD) IB Meister Consultants Group Published http://iea-retd.org/archives/publications/e- prosumers-report Timeframe January to June 2014 Motivation Are prosumers just a hype? Or are they a valuable policy option? Objective Empower policy makers to make informed decisions with regards to the legal and regulatory policy options of large scale decentralised production of non-incentivised PV.

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Agenda

• Is a PV Prosumer Revolution Imminent?
• No – Not Yet (Without Incentives and Enabling Policies)
• But Policy Makers Need to Watch Key Drivers...
• ... and Lay Out Potential Strategies Going Forward

RE-PROSUMERS

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The cost to install PV has fallen dramatically, and is likely to continue to do so

Is a PV Prosumer Revolution Imminent?

Source: IEA 2014) Energy Technology Perspectives

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PV market growth has exceeded early expectations

Is a PV Prosumer Revolution Imminent?

20.000 40.000 60.000 80.000 100.000 120.000 140.000 160.000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Global Cumulative Installed PV Capacity (MW) Cumulative Capacity

• Est. 25-35%

residential

Source: IEA-PVPS (2013); MCG Research

IEA WEO 2006 projection

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Solar cost curves are close to the retail price in many countries (i.e. “socket” parity) …

Is the PV Prosumer Revolution Imminent?

Bubble size = Size of electricity market If a bubble is above the curve for a particular year, the cost of solar is below residential electricity in that country at that time

Socket price

Source: Citi (2013)

Note of caution: Available analyses appear to be “static” rather than “dynamic” as they compare PV LCOEs to the current retail price, rather than the NPV of projected consumer expenditures on electricity over time

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The PV residential sector is a significant driver for decentralised power generation in various countries

Is a PV Prosumer Revolution Imminent?

5000 10000 15000 20000 25000 30000 35000 Germany US Japan Australia MW (2012) Non-Residential Residential

~25% ~20% ~85% ~70%

Source: IEA-PVPS (2013); SEIA (2014); PV Magazine (2013; 2014)

Some regions now have a very high share of “solar voters”

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Agenda

• Is a PV Prosumer Revolution Imminent?
• No – Not Yet (Without Incentives and Enabling Policies)
• But Policy Makers Need to Watch Key Drivers...
• ... and Lay Out Potential Strategies Going Forward

RE-PROSUMERS

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PV costs must fall significantly below socket parity in order for non-incentivized growth to occur

No Prosumer Revolution – Yet

PV LCOE > Retail price PV LCOE ≤ retail price, but investment not attractive PV LCOE < retail price; investment is compelling Socket Parity Retail electricity rate PV LCOE

• To reach this phase it can

still take a number of years

• Regulatory conditions are

crucial

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For the time being, prosumers still need incentives and favorable regulations -> support schemes remain key

• Mass non-incentivized prosumers are unlikely to arrive in the near-term
• Incentives (e.g. FITs) above the retail electricity rate have driven the prosumer

revolution to date

• Mass prosumer expansion will require policies that compensate most/all of PV
• utput (net metering, below-retail FITs, etc.)
• Without support schemes, storage will be required – which adds cost
• Non-incentivized mass defection from grids not to be expected soon.

No Prosumer Revolution – Yet

US Germany Spain Colombia

• Standard and

streamlined interconnection in most states

• Net metering in many

states

• Retail rates vary widely
• Most residential rates

volumetric

• Guaranteed

interconnection

• FIT for 90% of

production

• 10% of output must be

self-consumed or sold at wholesale

• FITs below retail rates
• Previously utilized FIT
• PV LCOE below retail

rates

• Introduced tax on self-

consumption

• Introduced fixed charge,

which makes onsite PV less attractive

• High retail rates
• Only onsite CHP

generation at palm oil plantations can feed into grid

• PV cannot feed-in
• Draft law might introduce

net metering

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Grid defection and wholesale competition scenarios for residential sector are unlikely in the near-term

• Grid defection with storage?
• Estimated 2030-2050 break-

even for US and Australia

• Onsite load management and

energy efficiency can accelerate timeline by a few years (but not decades)

• Wholesale competition for

residential PV generators?

• Uncertainty because of RE

impact on wholesale prices

• Wide range of wholesale

competition dates (for Italy and Spain range between 2025 and 2040)

No Prosumer Revolution – Yet

Defection LCOE vs. retail electricity price (Residential base case) [Y-AXIS 2012$/kWh. Source: RMI (2014)

Even if forward-looking scenarios are conservative and onsite load management and energy efficiency accelerate the case, there is little room for non incentivised mass defection

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Agenda

• Is a PV Prosumer Revolution Imminent?
• No – Not Yet (Without Incentives and Enabling Policies)
• But Policy Makers Need to Watch Key Drivers...
• ... and Lay Out Potential Strategies Going Forward

RE-PROSUMERS

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A complex picture of drivers and national specifics influence the different stakeholder groups

Policy Makers Need to Watch Key Drivers

Economic Drivers Behavioural Drivers Technology Drivers Prosumers PV Supply Chain Govern- ments Grid Operators Generators

DRIVERS STAKEHOLDERS

National Conditions Consumers

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Drivers can have enabling or constraining effects on prosumer uptake…

Policy Makers Need to Watch Key Drivers

High PV system costs Low PV system costs Low electricity prices and fixed charges High electricity prices and volumetric rates High self-consumption ratio Low self-consumption ratio High insolation Low insolation PV technology breakthroughs Improved self-consumption ratio Additional storage costs Improved self-consumption ratio Additional EV costs

Economic drivers Beha- vior Techno- logy

Environmental awareness, energy autonomy, “cool” factor Hassle factor, lack of trust in technology, policy uncertainty

Nat. cond.

Available roof space, tenant ownership Decreasing energy demand n/a Enable prosumers Constrain prosumers

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… and Stakeholder Interest are crucial, too.

Policy Makers Need to Watch Key Drivers

Stakeholders

Enable prosumers Constrain prosumers Increased resilience of energy supply; improved energy security Reduced tax income, potential for stranded assets Economic, social, and environmental benefits created for all consumers Increased retail electricity rates for other consumers Prosumers create new business

• pportunities

Reduced generator revenues Decreased revenue for TSOs and DSOs, grid investments to accommodate prosumers Prosumers can reduce T&D investments

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Solutions exist to increase the capability of grids to accommodate more prosumers

Categories Examples Utility- and System Owner-led Solutions  Grid reinforcement:  Advanced voltage control for HV/MW transformers  On-load tap changer, static volt ampere reactive control, booster transformer  Adopting storage controlled by the distribution grid operator  Network reconfiguration  Advanced closed-loop operation  Improved Data and Forecasting Prosumer-led solutions  Incentivize prosumer storage  Encourage greater self-consumption via price incentives  Curtail solar PV power output  PV orientation  Adoption of advanced or “smart” PV inverters Interactive Solutions  Demand response via local or market price signals  SCADA-based techniques  Voltage and VAR control technologies

Technical Challenges

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Policymakers need to keep all of these in mind when considering if, when, why, and how to take action

• Some of the drivers are less clear than others.
• Economic drivers are well identified and anaylzed
• Technology drivers will have different impacts
• PV breakthroughs will accelerate prosumer scale-up;
• Other technology trends, such as smart grids, batteries, and electric vehicles

may enable prosumers by improving the self-consumption ratio in place of net metering.

• However, they add additional cost…
• and may also add additional “hassle” if they are a prerequisite for prosumers.
• Some stakeholder drivers are difficult to predict. Prosumer behavior, for

example, could overwhelm economic considerations – this type of diffusion is poorly understood Policy Makers Need to Watch Key Drivers

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Opportunities and risks need to be clearly articulated and balanced – and stakeholder interests aligned

Policy Makers Need to Watch Key Drivers

• Emissions

reductions

• Water conservation
• Job creation
• Decrease fuel

imports

• T&D deferral
• Avoided losses
• PV popular with

voters

• “Energy

Democracy” Political benefits Grid benefits Economic benefits Environmental benefits

Challenges / Costs / Risks Opportunities / Benefits

• Generators lose

revenue

• Risk of bankruptcy
• Cost to expand grid
• Risk of stranded

assets

• Reduced revenue
• Risk of “death

spiral” Decreased TSO/DSO revenue Grid expansion and upgrades Incumbent generator risks Decreased tax revenues

• Lower tax payment

from the retail rate

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Agenda

• Is a PV Prosumer Revolution Imminent?
• No – Not Yet (Without Incentives and Enabling Policies)
• But Policy Makers Need to Watch Key Drivers...
• ... and Lay Out Potential Strategies Going Forward

RE-PROSUMERS

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To define a policy strategy, governments need to evaluate all drivers and balance opportunities and risks

• 1. Evaluate drivers and conditions

Are the conditions in place to support non- incentivised consumer scale-up?

• 2. Balance opportunities and risks

Given the trade offs, is support for prosumers a national policy objective?

• 3. Define policy strategy

Potential Strategies Going Forward

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Prosumer strategies are required to sustain growth and to enable industry transition

Potential Strategies Going Forward

New regulatory and policy approaches / paradigms for utility regulation and grid management

Prosumer Strategy Choices

Restrictive policies to avoid structural changes to utility business and regulatory paradigms Enabling policies like compensation for surplus production and transparent interconnectoin rules Incremental Structural

• 1. Constrain

prosumers

• 2. Enable

prosumers

• 3. Transition to

prosumers

A B

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Policies for Constraining Prosumers

• Restrictions on net metering or onsite consumption
• Restrictive roll-over policies for excess generation (i.e. how long can excess

power be banked?)

• Increased customer charges or demand charges
• Standby charges for onsite generation
• Regulations prohibiting onsite generation, or grid connection
• Rules prohibiting onsite storage
• Tax on self-consumed generation
• Tax on solar system components
• 1. Constrain

prosumers Potential Strategies Going Forward

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Policies for Enabling Prosumers

• 2. Enable

prosumers

• Connecting to the Grid
• Permission to interconnect
• Interconnection rules
• Interconnection application and review

fees

• Interconnection cost recovery
• Interconnection transparency
• Feeding into the Grid
• “behind” or “in front of” the meter
• Compensation for Electricity Fed into

the Grid

• Amount that will be compensated
• Compensation level: Above, at, below

retail rate

• Certainty of compensation level: Fixed

contracts, retail or wholesale compensation

• Efforts to Reduce Soft Costs
• Remove or reduce cumbersome

bureaucratic procedures

• Reduce or eliminate fees and costs
• Support PV marketing efforts in order to

reduce installer acquisition costs

Potential Strategies Going Forward

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Policies for Transitioning to Prosumers

Incremental approach Examples Prosumer compensation mechanisms  Buy-all/sell-all arrangements or hybrids with net metering  Net excess generation purchased at full retail rate, or (in islands) at, or near, the avoided cost rate Rate Design  Time-varying prices (this could be positive or negative, depending on the jurisdiction and level of PV penetration)  Pure volumetric tariffs ($/kWh), i.e. without fixed charges Ratemaking  Decoupling utility revenues from power sales  Lost revenue adjustment mechanisms or performance-based incentives Market Reforms  Allowing peer-to-peer power sharing  Encouraging new, prosumer-friendly business models Tax Reforms  Shift electricity sales tax to other income sources  Tax incentives or credits for solar system components, or investments

3.A Incremental Transition to prosumers Potential Strategies Going Forward

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Policies for Transitioning to Prosumers

Structural approach Examples Innovative business models  Utilities become neutral managers of grid infrastructure, brokers of new customer relationships, partners with prosumer service providers, or even financiers of prosumer infrastructure New product and service offerings  Instead of selling electricity as a universal bulk commodity, utilities could make differentiated offerings based on individual requirements.  Selling specific “services” such as light, heat, or load management New operational models  Strengthened and more sophisticated grid operators  Distribution grids to adapt management mechanisms of transmission grids, e.g. locational pricing, forecasting, and real time visibility Emerging technologies  E.g. smart grid infrastructure that will reconfigure the utility-customer relationship to be more integrated, interactive, and price responsive.  Utilities will have more visibility and control at the distribution level, customers more opportunities to react to electricity market

3.B StructuralTransition to prosumers Potential Strategies Going Forward

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Policies for Enabling Prosumers

• 2. Enable

prosumers

• Connecting to the Grid
• Permission to interconnect
• Interconnection rules
• Interconnect. application & review fees
• Interconnection cost recovery
• Interconnection transparency
• Feeding into the Grid
• Connect “in front of” or “behind” meter
• Compensation for Electricity Fed into

the Grid

• Amount that will be compensated
• Compensation level: Above, at, below

retail rate

• Certainty of compensation level: Fixed

contracts, retail or wholesale compensation

• Efforts to Reduce Soft Costs
• Remove or reduce cumbersome

bureaucratic procedures

• Reduce or eliminate fees and costs
• Support PV marketing efforts in order to

reduce installer acquisition costs

Potential Strategies Going Forward

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High-level framework for situating different jurisdictions in terms of their engagement with prosumers (1/2)

Prosumer Scenarios Drivers Policies Strategies No Prosumers  Weak conditions, e.g. low retail electricity prices  No policies or rules permitting interconnection or feeding into the grid  No regulatory or policy strategies for addressing prosumer challenges  Examples: The Gulf Cooperation Council member states Constrain Prosumers ✔  Good conditions for prosumers, such as high retail prices and low installed costs  Policies or laws that specifically prevent prosumers or that penalize prosumer development through fines or taxes  No policies or rules permitting interconnection or feeding into the grid  No regulatory or policy strategies for addressing prosumer challenges  Examples: Some Latin American and Caribbean (LAC) countries, Spain

Potential Strategies Going Forward

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High-level framework for situating different jurisdictions in terms of their engagement with prosumers (2/2)

Prosumer Scenarios Drivers Policies Strategies Enable Prosumers ✔ ✔  Conditions are in place to create a competitive environment for prosumers  Enabling policies allow prosumers to rapidly emerge on a non-incentivised basis.  Policy makers and utilities do not anticipate, plan for, or react to the challenges introduced by

• prosumers. Prosumer development conflicts with incumbent business models

 Examples: European countries that experienced PV booms during the past 5-10 years. Prosumer Transition – Incremental and Structural Approaches ✔ ✔ ✔  Conditions and enabling policies are in place.  Policy makers have identified clear objectives for supporting prosumers, near-term financial and technical boundaries and pathways to make the required grid infrastructure investments and support the development of alternative utility business models.  Examples: Some jurisdictions have implemented incremental transition approaches, e.g.

• Hawaii. No countries have yet to articulate an integrated roadmap for prosumer scale-up.

Potential Strategies Going Forward

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Prosumer scale-up will require policies to sustain growth and to enable industry and markets transition

Conclusions

• A prosumer revolution is not here yet.
• Support policies are currently the primary

determinant of prosumer emergence.

• But major drivers, especially economic ones, are

accelerating the case for prosumers.

• Policy makers should duly evaluate drivers and

conditions, as well as opportunities and challenges.

• And lay out the policies needed to enable and

encourage prosumers.

• RE-PROSUMERS provides a framework to define

thsese policies.

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Website: www.iea-retd.org Contact: info@iea-retd.org, kristian.petrick@iea-retd.org Contact

33

For additional information on IEA-RETD Online: www.iea-retd.org Contact: IEA_RETD@ecofys.com Report: http://iea-retd.org/archives/publications/re-prosumers-report

THANK YOU!

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A complex picture of drivers and national specifics influence the different stakeholder groups

But – policymakers need to watch the drivers

Drivers / Stakeholders Effect Prosumers PV Supply Sector Governments Utilities TSOs Economic + Save money Make (more) money Bring down costs of elec supply Grow through new business models Save on grid extension costs + Propose the creation

• f new jobs

Seek the creation of new jobs + Seek security of supply + / - Self consumption ratio + / - Own home fit for PV + / - Own insolation level

• Avoid costs of

(keeping) incentives schemes Avoid cannibalising existing business models Avoid increased costs

• Avoid losing taxes

revenues Avoid lower revenues

• The report provides a description and discussion of all drivers

www.iea-retd.org 36 Drivers / Stakeholders Effect Prosumers PV Supply Sector Governments Utilities TSOs Behavior + Perceive PV as "cool" Action against climate change Green its bottom line Green its bottom line + Increase sense of independence + Show status and prestige + / - Trust in local policies Capture political return (1 rooftop equals >1,5 votes) Openness to change Openness to change + / - + / -

• Perceive as

hassle/unsafe to install/maintain

• A complex picture of drivers and national specifics influence

the different stakeholder groups

But – policymakers need to watch the drivers

The report provides a description and discussion of all drivers

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But – policymakers need to watch the drivers

A complex picture of drivers and national specifics influence the different stakeholder groups

Drivers / Stakeholders Effect Prosumers PV Supply Sector Governments Utilities TSOs Technology + Possibility of doing it

• neself

Differentiate through more competitive

• ffers

Take leadership position Take leadership position Take leadership position + Interest for technology Accelerate technology breakthroughs on the market (PV, smart grids, storage…) + + / - + / - + / -

• Address safety

concerns Address supply concerns Address supply concerns

• Address grid safety

concerns

• The report provides a description and discussion of all drivers

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But – policymakers need to watch the drivers

A complex picture of drivers and national specifics influence the different stakeholder groups

Drivers / Stakeholders Effect Prosumers PV Supply Sector Governments Utilities TSOs National Conditions + / - Administrative burden Lobbying power Existing regulatory framework Supply obligations Supply obligations Residential buildings fit for PV Residential buildings fit for PV Degree of concentration Degree of concentration + / - Compensation structure Compensation structure + / - Fit of existing infrastructure Fit of existing infrastructure

The report provides a description and discussion of all drivers

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… and national conditions can also impact prosumer development

Available roof space Rooftop space not a near-term limitation; rooftop PV could supply 20-40% of electricity demand in US and Europe Share of rental property Renters do not have an incentive to invest in PV; 30% rental property in EU

• vs. 35% in US

Electricity demand trends Flat or declining demand increases competition between prosumers and

• ther generators

Renewable energy development Non-prosumer renewable energy development may “crowd out” prosumers Existing grid infrastructure Large, modern grids more able to absorb prosumers than small, old or remote grids

Policy Makers Need to Watch Key Drivers