Econonomics of Energy and Environmental Policy

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Consumers or prosumers, customers or competitors? - Some Australian perspectives on possible energy users of the future

Governance arrangements for electricity industries commonly claim the interests of consumers as their paramount objective. This would suggest a key decision making role for energy users, in all their diversity. However, the industry's critical role in societal, welfare, large environmental impacts, and the challenges of ensuring it's secure and reliable operation, all represent key shared long-term interests requiring high levels of coordination. The role of energy users within many electricity industries has transitioned over time from clients to citizens, then to consumers and now, in restructured industries, to customers. Increasingly, however, emerging distributed energy technologies including photovoltaics, storage and 'smart' loads are offering energy users new industry roles as prosumers rather than just consumers, and utility business partners, or potentially even utility competitors, rather than just customers. This paper outlines some of the experiences of energy users in the Australian National Electricity Market over the past decade as more than 15% of households have installed PV systems, and incumbent industry stakeholders and policy makers have struggled to reconcile formal market principles of encouraging energy user participation, with the realities of what such participation can do to existing business models. Australia's experience holds broader relevance as electricity industries worldwide look to better manage the challenges posed by prosumers while facilitating the societal benefits they can bring, particularly with the growing capabilities and falling costs of PV and energy storage systems. More generally, facilitating greater engagement with energy users will likely be essential in establishing the societal consensus required for the profound and highly disruptive transformation to a cleaner energy future.
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JEL Codes:L51: Economics of Regulation, D12: Consumer Economics: Empirical Analysis, M21: Business Economics

Keywords: energy consumer, prosumer, photovoltaics (PV), battery storage, utility regulation, policy

DOI: 10.5547/2160-5890.6.1.imac

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Published in Volume 6, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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