A Prosumer Electricity Market
A Prosumer is both a consumer and a producer in a marketplace.
In a market, producers and consumers share the profits of any transaction. The producers get a higher price than it costs to produce, and a consumer receives a lower price by selecting the lowest cost supplier. The share of the profits come back in different ways. The producer gets their share of the profits by having a percentage of the producing asset's ownership, which entitles them to a share of the profits from ownership.
There is another way to share the profits without involving ownership of the asset. It is called consumer capital, and you can find a description at "Prepayments an Efficient Form of Capital".
In a Prosumer market, all capital raising is with Consumer Capital. The producer gets their share of profits with a guaranteed profit, and the consumer shares with future discounted goods. The profits come from producers and consumers agreeing on a price that gives a profit. The producer receives a share of the profits from sales, and the consumer gets their share from discounts.
Using this approach in the electricity market removes the need for pricing regulators to set a return on capital or set the electricity price. The price is set by producers and consumers negotiating a price. The energy regulator oversees the ongoing negotiations.
The electricity market is regulated, and it is evolving with new technologies to meet other requirements from society and reduce the cost. The primary change is to remove burning fossil fuels to produce electricity. Renewable energy with storage replaces burning fossil fuels.
The new electricity market has production distributed as well as distributed consumption and storage. The new market requires more information to operate effectively and needs better measurement of production and consumption.
A Prosumer Metering System
The Australian Energy Market is a five-minute market at the bulk producer level and varies from seconds to three months at the consumer level. To build and operate an efficient electricity market, we need an efficient metering system at the building level and local generation level. The NBN has created the infrastructure for electricity consumption, production and storage metering at the building level.
Building metering at the millisecond level will allow prosumers to operate in the five-minute wholesale market for both production and consumption. Prosumers can also participate in other local and regional electricity markets.
The first step in making a Prosumer electricity market is to allow building and local markets to operate within the five-minute wholesale market. Each building that comes into the five-minute market will reduce its cost of electricity. The savings can pay for the change to a distributed renewable system.
Every building is different, but for estimation purposes, assume for each household:
- The cost of installing modern metering is $1500.
- The cost of electricity is $2,000 a year.
- The retail prices are 20% or $400 a year.
- At least a 30% saving from operating in the five-minute market.
- The cost of running the metering is 10% of the savings.
The profit from modern metering is $666 minus 10% or $600 per year. Prosumers collectively decide how to divide the profit. It could be $150 to investors, $300 in lower prices and $150 in new capital.
For Canberra, with 200,000 households, it means there is potentially 600 times 200,000 or $120,000,000 in savings from dwellings. As other sales are about the same as household sales, we can assume about $240,000,000 each year in potential savings. A percentage of the savings will more than pay for the transition to 100% renewable energy.