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Rise of the Prosumer

  • March 2015
  • -
  • Frost & Sullivan

Key Findings

-One of the most prominent methods of carbon reduction is by increasing the amount of electricity produced by highly efficient distributed and renewable generation technologies. Incentives and legislation have encouraged energy consumers to shift from conventional power generation to renewable power generation. Energy users are no longer confined to consumption of energy, and are increasingly involved in contributing to the energy distributed across grids by participating in the generation of energy.
-The intermittency and unpredictability of renewable technologies have led power suppliers to invest in smart grid solutions. Investments in smart grid infrastructure have encouraged active participation by power consumers. They have evolved from passive consumers to active producers, commonly termed as ‘prosumers’ in the energy market.
-Political willingness and cost allocation initiatives to facilitate grid integration across various distributed generation technologies will be a key driver for the growth of prosumers. Investments in technological developments will also ensure efficient energy management by the prosumers.
-Technology-led price decline of renewable energy installations has led to increased competitiveness for conventional energy sources. The levelised cost of electricity for renewable generation is attracting increased investments. Distributed energy production and decentralisation of power generation through rooftop solar panels and wind farms have also contributed to the rapid rise in the number of energy prosumers. Frost & Sullivan forecasts that the traditional energy system will gradually evolve into a prosumer-led utility model across both developed and emerging markets.

Key CEO 360 Degree Perspectives

Grid parity, as a result of decline in the levelised cost of electricity (LCOE), will encourage growth of prosumers.

Due to the huge amount of investment required in renewables, prosumers thrive when the retail electricity price is high.
Smart energy management solutions, smart grids, and energy storage solutions are crucial enablers of prosumer growth.
Increased investment in renewable and distributed generation technologies will be a key driver for the rise of prosumers.
Regulations and supportive legislation are fundamental to the development of a prosumer-led energy system.

Three Big Predictions

Increased penetration of prosumers in the energy value chain will prove disruptive to the traditional energy models. By 2020, there will be approximately x million residential prosumers in North America alongside a strong growth in commercial and industrial prosumers in Europe, as well as strong opportunities globally.
Utilities and distribution service operators will introduce differing supply contracts, depending on grid usage by prosumers. Consumers will have more control over the amount of energy generated, stored, and distributed across the grids.
Passive energy consumers require supportive legislation, policies, tax credits, and compelling financial incentives to evolve into active prosumers. Grid parity and energy storage solutions will be the key game changers in this market beyond 2020.

Utility Models have Gradually Evolved from a Centralised to a Decentralised Model, Encouraging End User Participation

- The centralised model incorporated sequential, centrally organised processes from generation to retail.
- There were a few large power plants scattered across major centers of consumptions, feeding power through the grid.
- The flow of power was one way, namely, from the provider to the consumers.
- New players have emerged in the decentralised model. Power, especially industrial power, is produced through on-site captive generation.
- The value chain includes numerous independent power producers who now have access to smart technology, enabling two-way network.
- There is an increasing number of very small (below 100kW) power producers acting as prosumers.
- Energy storage has now become a potential game changer, which support smart infrastructures.

The Amount of Energy Produced by a Prosumer is Driven by its Need for Self-sufficiency and its Ability of Grid Integration

According to the International Energy Agency’s Renewable Energy Technology Deployment (IEA-RETD), “Consumers who have been the passive recipients of commodity electricity may increasingly opt to become ‘prosumers’ who actively generate power instead of purchasing it from the market. The term has migrated to other industries, and in the electricity industry, the term is used to refer to energy consumers who also produce their own power from a range of different on-site generators (e.g., diesel generators, combined heat-and-power systems, wind turbines, and solar photovoltaic (PV) systems).”

Table Of Contents

Rise of the Prosumer
Rise of the Prosumer : Investments in Distributed Renewable Generation will Power a Prosumer-driven Energy Model
Executive Summary 3
Overview of Prosumers 8
Key Enablers 16
- Growth in Decentralised Energy 19
- Levelised Cost of Electricity/Grid Parity 24
- Retail Electricity Price 29
- Supportive Regulation/Legislation 32
- Metering 35
- Energy Storage 38
Business Models and Case Studies 43
Conclusions 48
The Frost and Sullivan Story 51

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