Beyond energy efficiency: A ‘prosumer market’ as an integrated platform for consumer engagement with the energy system

Panel: 1. Foundations of future energy policy

This is a peer-reviewed paper.

Author:
Yael Parag, School of Sustainability, Interdisciplinary Center (IDC), Israel

Abstract

Future renewable, smart-grid and highly efficient low-carbon energy systems present many challenges to existing energy security policies and will thus require a paradigm shift in the way these policies are planned and structured. In particular, demand side management will necessarily play a greater role in future low carbon energy systems and this will see consumers providing various ancillary services to the grid including: demand reduction, demand response, energy storage and micro-generation. Essentially, consumers will become prosumers: consumers that provide various services to the system. This is in marked contrast to existing energy policies which are supply-biased and dominated by techno-economic considerations, and thus fail to effectively engage and integrate consumers into the system.

This paper explores this challenge from a consumer and socio-techno-economic perspective and focuses on the ‘prosumer market’ as an innovative balancing mechanism that can match supply and demand. It is envisaged as a platform, which enables users to engage with market-based energy prosumption strategies and incentivizes demand reduction. A prosumer market goes beyond targeting efficiency gains. It allows energy users the flexibility to choose which energy services they want to provide and thus diminishes risks for users. The increased flexibility opens opportunities for involving local communities, Energy Service Companies (ESCOs), and individuals in generating off-grid energy and off-grid energy services, which in turn grants households and communities greater freedom to select how and when to ‘prosume’. A prosumer market, thus, acts as an enabling platform for creating and developing new and innovative markets and niches that are needed to prevent further technological lock-ins; this will be particularly necessary during the energy system transition period.

The paper outlines the ‘prosumer market’ concept. It situates it in the current policy landscape, discusses optional designs and structures, and highlights directions for further investigation.