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Power to the People: shifting control over
electricity to citizens and consumers
1
Dr David Robinson
UsersTCP10 webinar,
S...
• Introduction
• The changing electricity system
• The changing consumer
• The changing political calculus
• New paradigm ...
• Introduction
• The changing electricity system
• The changing consumer
• The changing political calculus
• New paradigm ...
• Today, electricity consumers have little influence in the sector
– Liberalization not working as conceived: markets driv...
• Introduction
• The changing electricity system
• The changing consumer
• The changing political calculus
• New paradigm ...
6THE CHANGING ELECTRICITY SYSTEM
Electricity Industry Upside Down
• From flex supply to flex demand (for some system requirements)
• New types of flex demand
– Two-way: from interruptible ...
• Demand exceeded available supply after sun went down (solar off)
• Replacement for solar inadequate, leading to planned ...
• Introduction
• The changing electricity system
• The changing consumer
• The changing political calculus
• New paradigm ...
• Active consumers could contribute in many ways
– lowering costs of system energy security
– facilitating renewables pene...
• Behind the meter (BTM): rooftop solar pv, batteries, smart appliances …
• Relatively limited in most countries but growi...
12THE CHANGING CONSUMER
BTM Assets (2)
13THE CHANGING CONSUMER
Rising EU electricity prices 2008-15
BTM Assets (3)
14THE CHANGING CONSUMER
Rising value of flexibility to balance
Renewable penetration and decentralization raise the cost o...
• Role: Buy flexibility from multiple consumers to resell in markets
• Attractiveness for consumers: lower bill; informati...
• Role: citizens form communities to share energy generation, storage,
distribution, supply, optimization and trading
• At...
• Introduction
• The changing electricity system
• The changing consumer
• The changing political calculus
• New paradigm ...
• Governments need energy consumers to participate
– Decarbonized electricity system (flexibility)
– Low carbon energy inv...
• Introduction
• The changing electricity system
• The changing consumer
• The changing political calculus
• New paradigm ...
• Conditions creating opportunity for consumers to participate in
markets and determine their energy mix and reliance on t...
• Decarbonization is very expensive.
• Need efficient prices that reflect changing costs
– Fiscal policy reform
– Tariff r...
• Behavioural issues affect success or failure of consumer participation
– Loss aversion, confidentiality, control, comfor...
• Need for innovation
– Regulation (e.g. tariff design)
– Markets (e.g. new markets and products; consumer acccess)
– Tech...
• Consumers may raise system costs; and system may raise costs or
threaten security by ignoring consumer preferences
• Hid...
25NEW PARADIGM OF DISTRIBUTED POWER
Two-market approach
26NEW PARADIGM OF DISTRIBUTED POWER
• Energy mix that lowers emissions
– Use AA renewable energy whenever available
– Limi...
• Full benefits of two-market approach require a fundamental change
• Experimenting with individual elements would deliver...
• Introduction
• The changing electricity system
• The changing consumer
• The changing political calculus
• New paradigm ...
• Active consumers and citizens are essential for net zero emissions
• Fundamental changes are under way in electricity – ...
• Here are links to OIES selected papers on electricity market design These
and other papers published by the OIES electri...
David Robinson
david.robinson@oxfordenergy.org
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Power to the people: shifting control over electricity to citizens and consumers

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Efficient electricity prices are only the first step to unleashing the potential for consumers to help drive the energy transition. In this webinar, David Robinson from the Oxford Institute for Energy Studies will present on how consumers can help decarbonize the electricity system and how to engage the demand side through a combination of price and non-price incentives.

Power to the people: shifting control over electricity to citizens and consumers

  1. 1. Power to the People: shifting control over electricity to citizens and consumers 1 Dr David Robinson UsersTCP10 webinar, September 10, 2020
  2. 2. • Introduction • The changing electricity system • The changing consumer • The changing political calculus • New paradigm of distributed power • Conclusion 2INDEX
  3. 3. • Introduction • The changing electricity system • The changing consumer • The changing political calculus • New paradigm of distributed power • Conclusion 3INTRODUCTION
  4. 4. • Today, electricity consumers have little influence in the sector – Liberalization not working as conceived: markets driving decisions – Central authorities take key decisions (e.g. mix, reliability); consumers pay • However, power is shifting to consumers and citizens for three reasons: – Changing electricity system: demand flexibility key – Changing consumer: incentives and means to exert greater influence – Changing political calculus: engage consumers and citizens in transition • Public policy challenge is to create a new liberalization paradigm – Allowing consumers to drive the process – Aligning incentives of consumers and the system through markets 4INTRODUCTION Power to the People
  5. 5. • Introduction • The changing electricity system • The changing consumer • The changing political calculus • New paradigm of distributed power • Conclusion 5THE CHANGING ELECTRICITY SYSTEM
  6. 6. 6THE CHANGING ELECTRICITY SYSTEM Electricity Industry Upside Down
  7. 7. • From flex supply to flex demand (for some system requirements) • New types of flex demand – Two-way: from interruptible to up/down flexibility – Real-time: from predictable to unpredictable flexibility – Local: from system-wide to local flexibility – All: from large consumers to all consumers • But incentives to provide this demand flexiblity are weak Need to develop incentives for consumers to be flexible 7THE CHANGING ELECTRICITY SYSTEM The system needs flexible demand
  8. 8. • Demand exceeded available supply after sun went down (solar off) • Replacement for solar inadequate, leading to planned rolling blackouts • Demand flexibility (e.g. lower demand or batteries) could have helped – Did so for large consumers – But not for small ones, due to absence of price incentives for flexibility Incentives for demand flexibility (downward) needed to avoid unnecessary blackouts and support renewables penetration 8THE CHANGING ELECTRICITY SYSTEM Glimpse – California outages 08/2020
  9. 9. • Introduction • The changing electricity system • The changing consumer • The changing political calculus • New paradigm of distributed power • Conclusion 9THE CHANGING CONSUMER
  10. 10. • Active consumers could contribute in many ways – lowering costs of system energy security – facilitating renewables penetration – competing with existing energy resources – disciplining energy supply companies • Consumers now have greater potential and incentives to be active – The growth and declining costs of BTM resources and digitization – The rising value of flexibility to the system – New commercial and social models facilitate active consumption Consumers have new potential to make competition more effective and take control of decisions affecting their energy supply. 10THE CHANGING CONSUMER Why consumers will become more active
  11. 11. • Behind the meter (BTM): rooftop solar pv, batteries, smart appliances … • Relatively limited in most countries but growing quickly • Reasons for growth depend on asset, consumer, economics, but include – Falling costs and potential to reduce energy bills – Wish to control energy mix and security – Environmental and social objectives BTM assets empower consumers THE CHANGING CONSUMER BTM assets (1)
  12. 12. 12THE CHANGING CONSUMER BTM Assets (2)
  13. 13. 13THE CHANGING CONSUMER Rising EU electricity prices 2008-15 BTM Assets (3)
  14. 14. 14THE CHANGING CONSUMER Rising value of flexibility to balance Renewable penetration and decentralization raise the cost of balancing the system and the value of flexibility
  15. 15. • Role: Buy flexibility from multiple consumers to resell in markets • Attractiveness for consumers: lower bill; information about consumption; environmental attributes; alternative to traditional suppliers • Attractivess for system: lower cost of demand flexibility; competition for existing generation. • Main concerns are related to market access, impact on existing suppliers and remote control of consumer flexibility 15THE CHANGING CONSUMER Aggregators Aggregators use optimization platforms to manage BTM resources
  16. 16. • Role: citizens form communities to share energy generation, storage, distribution, supply, optimization and trading • Attractiveness to consumer/citizens: most ECs emphasize potential cost reduction, regaining control, along with environmental and social goals • Attractiveness to system: policy makers emphasize citizen engagement in energy transition and tapping demand flexibility; these communities may also enhance system security of supply • Main concerns are to ensure that communities increase social welfare and do not raise system costs or shift costs to others 16THE CHANGING CONSUMER Energy communities European legislation encourages development of ECs
  17. 17. • Introduction • The changing electricity system • The changing consumer • The changing political calculus • New paradigm of distributed power • Conclusion 17THE CHANGING POLITICAL CALCULUS
  18. 18. • Governments need energy consumers to participate – Decarbonized electricity system (flexibility) – Low carbon energy investment (electrification) – Political support for the energy transition (gilets jaunes) • Political calculus on liberalization – System MC > AC: intervene to limit price rises – System MC < AC: support liberalization to enable lower prices Governments more likely to support liberalization and consumer participation as renewables rise and costs of renewables fall 18 Political calculus THE CHANGING POLITICAL CALCULUS
  19. 19. • Introduction • The changing electricity system • The changing consumer • The changing political calculus • New paradigm of distributed power • Conclusion 19NEW PARADIGM OF DISTRIBUTED POWER
  20. 20. • Conditions creating opportunity for consumers to participate in markets and determine their energy mix and reliance on the system. • This involves aligning consumer preferences with system needs – Efficient prices and market access – Non-price (behavioural) incentives – Innovation and experimentation – Managing risks of non-alignment – New market design: Two-market approach 20NEW PARADIGM OF DISTRIBUTED POWER Creating the new paradigm
  21. 21. • Decarbonization is very expensive. • Need efficient prices that reflect changing costs – Fiscal policy reform – Tariff reform – Market reform • Market access – Access for consumers to all existing markets – Create local energy and flexibility markets Reforms to provide efficient prices, access to all markets, new markets 21NEW PARADIGM OF DISTRIBUTED POWER Efficient prices and market access
  22. 22. • Behavioural issues affect success or failure of consumer participation – Loss aversion, confidentiality, control, comfort, understanding • Key role of technology and communication strategies (Sarah Darby) – Connectivity – interactions between technologies, software architecture – Control – interactions between people and technology – Care – interactions between people Behavioural issues can be as important as efficient price signals 22NEW PARADIGM OF DISTRIBUTED POWER Non-price behavioural incentives
  23. 23. • Need for innovation – Regulation (e.g. tariff design) – Markets (e.g. new markets and products; consumer acccess) – Technology (e.g. optimization programmes) – Social and business models (e.g. aggregation, energy community) • Government support for R&D is justified on demand side – Financial support for innovation – Industrial strategy (EV with renewables) – Training for users – Regulatory sandboxes and pilots 23 Innovation and experimentation
  24. 24. • Consumers may raise system costs; and system may raise costs or threaten security by ignoring consumer preferences • Hidden subsidies (e.g. tariff design with fixed cost in variable tariff) – Raise system costs and shift cost to others – Remedies: explict subsidies and tariff reform • Balkanization (e.g. Energy Communities try to isolate) – Raises community costs and system costs – Remedies: consumer freedom, integration opportunity and benefits • Consumer lose control (e.g. remote control of devices) – System needs, not consumer preferences, drive remote control – This can raise system costs and lead to consumer withdrawal – Remedies: commercial options for consumer control 24NEW PARADIGM OF DISTRIBUTED POWER Managing risks of non-alignment
  25. 25. 25NEW PARADIGM OF DISTRIBUTED POWER Two-market approach
  26. 26. 26NEW PARADIGM OF DISTRIBUTED POWER • Energy mix that lowers emissions – Use AA renewable energy whenever available – Limit need for OD fossil energy • Efficient level of security of supply – Reflects consumer preferences regarding reliance on system (VOLL) – Consumers buying OD energy are responsible for the cost • Investment incentives – Flexibility resources – Supply chain to support demand flexibility • Exit strategy for renewable subsidies and for capacity support Benefits of two-market approach
  27. 27. • Full benefits of two-market approach require a fundamental change • Experimenting with individual elements would deliver benefits without major disruption, for instance incentives to consume AA energy – AA pricing within an energy community – AA product offered by supplier – AA product sold (PPA) to an energy community or industry – Central auction for AA power backed up by AA contracts • Government could provide financial support to make the AA attractive and for required equipment, software and communication. • These projects could be monitored in a regulatory sandbox and be the basis for future development of the two market approach. 27NEW PARADIGM OF DISTRIBUTED POWER Two-markets: experimentation
  28. 28. • Introduction • The changing electricity system • The changing consumer • The changing political calculus • New paradigm of distributed power • Conclusion 28
  29. 29. • Active consumers and citizens are essential for net zero emissions • Fundamental changes are under way in electricity – the aim should be to let consumers drive the process rather than central decision-makers • The aim of the proposed paradigm and the two market design is to open the way for them to do so. 29CONCLUSIONS Conclusions
  30. 30. • Here are links to OIES selected papers on electricity market design These and other papers published by the OIES electricity programme can be found here: https://www.oxfordenergy.org/electricity-programme/ • https://www.oxfordenergy.org/wpcms/wp- content/uploads/2019/11/Prices-Behind-the-Meter-Insight-61.pdf • https://www.oxfordenergy.org/wpcms/wp- content/uploads/2017/06/The-Decarbonised-Electricity-Sysytem-of-the- Future-The-Two-Market-Approach-OIES-Energy-Insight.pdf • https://www.oxfordenergy.org/wpcms/wp- content/uploads/2016/02/Electricity-markets-are-broken-can-they-be- fixed-EL-17.pdf 30
  31. 31. David Robinson david.robinson@oxfordenergy.org
  • YingjieWang4

    Oct. 12, 2020
  • israelbautista17

    Sep. 22, 2020
  • Pierrejeancherret

    Sep. 12, 2020

Efficient electricity prices are only the first step to unleashing the potential for consumers to help drive the energy transition. In this webinar, David Robinson from the Oxford Institute for Energy Studies will present on how consumers can help decarbonize the electricity system and how to engage the demand side through a combination of price and non-price incentives.

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