RETD stands for âRenewable Energy Technology Deploymentâ. IEA-RETD is a policy-focused, technology cross-cutting pla
Is a Prosumer Revolution Imminent? Residential PV-Prosumers – Drivers and Policy Options (RE-PROSUMERS) Kristian Petrick
IEA-RETD Operating Agent IRED 2014, Kyoto, Japan, 20 November 2014
Background IEA-RETD
The mission of IEA-RETD is to accelerate the large-scale deployment of renewable energies RETD stands for “Renewable Energy Technology Deployment”. IEA-RETD is a policy-focused, technology cross-cutting platform (“Implementing Agreement”) under the legal framework of the International Energy Agency Created in 2005, currently 8 member countries: Canada, Denmark, France, Germany, Ireland, Japan, Norway, UK. IEA-RETD commissions annually 5-7 studies bringing together the experience of some of the world’s leading countries in RE with the expertise of renowned consulting firms and academia. Reports and handbooks are freely available at www.iea-retd.org. IEA-RETD organizes workshops and presents at international events. www.iea-retd.org
2
RE-PROSUMERS
Study on the effects of large uptake of non-incentized residential PV by ‘prosumers’ PSG
Georgina Grenon (FR, chair), Michael Paunescu (CA), Lisa Dignard (CA), Otto Bernsen (PVPS , NL), Gaëtan Masson (PVPS, OA), Axel Strang (FR), Simon Müller & Cédric Philibert (IEA), Kristian Petrick (IEA-RETD)
IB
Meister Consultants Group
Published
http://iea-retd.org/archives/publications/eprosumers-report
Timeframe
January to June 2014
Motivation
Are prosumers just a hype? Or are they a valuable policy option?
Objective
Empower policy makers to make informed decisions with regards to the legal and regulatory policy options of large scale decentralised production of non-incentivised PV.
www.iea-retd.org
4
RE-PROSUMERS
Agenda Is a PV Prosumer Revolution Imminent? No – Not Yet (Without Incentives and Enabling Policies) But Policy Makers Need to Watch Key Drivers... ... and Lay Out Potential Strategies Going Forward
www.iea-retd.org
5
Is a PV Prosumer Revolution Imminent?
The cost to install PV has fallen dramatically, and is likely to continue to do so
Source: IEA 2014) Energy Technology Perspectives
www.iea-retd.org
6
Is a PV Prosumer Revolution Imminent?
Global Cumulative Installed PV Capacity (MW)
PV market growth has exceeded early expectations 160.000 140.000
120.000 100.000 80.000 60.000 40.000 Est. 25-35% residential
20.000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: IEA-PVPS (2013); MCG Research
www.iea-retd.org
Cumulative Capacity
IEA WEO 2006 projection 7
Is the PV Prosumer Revolution Imminent?
Socket price
Solar cost curves are close to the retail price in many countries (i.e. “socket” parity) …
Bubble size = Size of electricity market If a bubble is above the curve for a particular year, the cost of solar is below residential electricity in that country at that time
Source: Citi (2013)
www.iea-retd.org
Note of caution: Available analyses appear to be “static” rather than “dynamic” as they compare PV LCOEs to the current retail price, rather than the NPV of projected consumer expenditures on electricity over time 8
Is a PV Prosumer Revolution Imminent?
The PV residential sector is a significant driver for decentralised power generation in various countries 35000
Some regions now have a very high share of “solar voters”
30000
MW (2012)
25000 20000 Non-Residential Residential
15000 10000 5000 0
www.iea-retd.org
~25%
~20%
Germany
US
~85%
Japan
Source: IEA-PVPS (2013); SEIA (2014); PV Magazine (2013; 2014)
~70%
Australia 9
RE-PROSUMERS
Agenda Is a PV Prosumer Revolution Imminent? No – Not Yet (Without Incentives and Enabling Policies) But Policy Makers Need to Watch Key Drivers... ... and Lay Out Potential Strategies Going Forward
www.iea-retd.org
10
No Prosumer Revolution – Yet
PV costs must fall significantly below socket parity in order for non-incentivized growth to occur • To reach this phase it can still take a number of years • Regulatory conditions are crucial
Socket Parity
PV LCOE >
PV LCOE
Retail price
www.iea-retd.org
PV LCOE ≤ retail price, but investment not attractive
PV LCOE < retail price; investment is compelling
Retail electricity rate
11
No Prosumer Revolution – Yet
For the time being, prosumers still need incentives and favorable regulations -> support schemes remain key Mass non-incentivized prosumers are unlikely to arrive in the near-term Incentives (e.g. FITs) above the retail electricity rate have driven the prosumer revolution to date Mass prosumer expansion will require policies that compensate most/all of PV output (net metering, below-retail FITs, etc.) Without support schemes, storage will be required – which adds cost
Non-incentivized mass defection from grids not to be expected soon. US •
•
• •
Standard and streamlined interconnection in most states Net metering in many states Retail rates vary widely Most residential rates volumetric
www.iea-retd.org
Germany
Spain
Colombia
• Guaranteed interconnection • FIT for 90% of production • 10% of output must be self-consumed or sold at wholesale • FITs below retail rates
• Previously utilized FIT • PV LCOE below retail rates • Introduced tax on selfconsumption • Introduced fixed charge, which makes onsite PV less attractive
• High retail rates • Only onsite CHP generation at palm oil plantations can feed into grid • PV cannot feed-in • Draft law might introduce net metering 12
No Prosumer Revolution – Yet
Grid defection and wholesale competition scenarios for residential sector are unlikely in the near-term Grid defection with storage? Estimated 2030-2050 breakeven for US and Australia Onsite load management and energy efficiency can accelerate timeline by a few years (but not decades) Wholesale competition for residential PV generators? Uncertainty because of RE impact on wholesale prices Wide range of wholesale competition dates (for Italy and Spain range between 2025 and 2040)
Defection LCOE vs. retail electricity price (Residential base case) [Y-AXIS 2012$/kWh. Source: RMI (2014)
Even if forward-looking scenarios are conservative and onsite load management and energy efficiency accelerate the case, there is little room for non incentivised mass defection www.iea-retd.org
13
RE-PROSUMERS
Agenda Is a PV Prosumer Revolution Imminent? No – Not Yet (Without Incentives and Enabling Policies) But Policy Makers Need to Watch Key Drivers... ... and Lay Out Potential Strategies Going Forward
www.iea-retd.org
14
Policy Makers Need to Watch Key Drivers
A complex picture of drivers and national specifics influence the different stakeholder groups STAKEHOLDERS Prosumers
Governments
Grid Operators
Generators
Consumers
PV Supply Chain
DRIVERS
Economic Drivers
Behavioural Drivers
Technology Drivers
National Conditions
www.iea-retd.org
15
Policy Makers Need to Watch Key Drivers
Drivers can have enabling or constraining effects on prosumer uptake…
Economic drivers
Constrain prosumers High PV system costs
Low PV system costs
Low electricity prices and fixed charges
High electricity prices and volumetric rates
Low self-consumption ratio
Hassle factor, lack of trust in technology, policy uncertainty
Nat. cond.
Technology
Behavior
Low insolation
www.iea-retd.org
Enable prosumers
n/a
High self-consumption ratio
High insolation Environmental awareness, energy autonomy, “cool” factor PV technology breakthroughs
Additional storage costs
Improved self-consumption ratio
Additional EV costs
Improved self-consumption ratio
Decreasing energy demand
Available roof space, tenant ownership 16
Policy Makers Need to Watch Key Drivers
… and Stakeholder Interest are crucial, too. Constrain prosumers
Stakeholders
Decreased revenue for TSOs and DSOs, grid investments to accommodate prosumers Reduced generator revenues
Increased retail electricity rates for other consumers
Reduced tax income, potential for stranded assets www.iea-retd.org
Enable prosumers
Prosumers can reduce T&D investments
Prosumers create new business opportunities Economic, social, and environmental benefits created for all consumers
Increased resilience of energy supply; improved energy security 17
Technical Challenges
Solutions exist to increase the capability of grids to accommodate more prosumers Categories Utility- and System Owner-led Solutions
Examples
Prosumer-led solutions Interactive Solutions
www.iea-retd.org
Grid reinforcement: Advanced voltage control for HV/MW transformers On-load tap changer, static volt ampere reactive control, booster transformer Adopting storage controlled by the distribution grid operator Network reconfiguration Advanced closed-loop operation Improved Data and Forecasting Incentivize prosumer storage Encourage greater self-consumption via price incentives Curtail solar PV power output PV orientation Adoption of advanced or “smart” PV inverters Demand response via local or market price signals SCADA-based techniques Voltage and VAR control technologies
19
Policy Makers Need to Watch Key Drivers
Policymakers need to keep all of these in mind when considering if, when, why, and how to take action Some of the drivers are less clear than others. Economic drivers are well identified and anaylzed Technology drivers will have different impacts PV breakthroughs will accelerate prosumer scale-up; Other technology trends, such as smart grids, batteries, and electric vehicles may enable prosumers by improving the self-consumption ratio in place of net metering. However, they add additional cost… and may also add additional “hassle” if they are a prerequisite for prosumers.
Some stakeholder drivers are difficult to predict. Prosumer behavior, for example, could overwhelm economic considerations – this type of diffusion is poorly understood www.iea-retd.org
20
Policy Makers Need to Watch Key Drivers
Opportunities and risks need to be clearly articulated and balanced – and stakeholder interests aligned Opportunities / Benefits Political benefits • PV popular with voters • “Energy Democracy” Economic benefits • Job creation • Decrease fuel imports
www.iea-retd.org
Grid benefits
Challenges / Costs / Risks Decreased TSO/DSO revenue
Grid expansion and upgrades
• T&D deferral
• Reduced revenue
• Cost to expand grid
• Avoided losses
• Risk of “death spiral”
• Risk of stranded assets
Environmental benefits
Incumbent generator risks
• Emissions reductions
• Generators lose revenue
• Water conservation
• Risk of bankruptcy
Decreased tax revenues • Lower tax payment from the retail rate
21
RE-PROSUMERS
Agenda Is a PV Prosumer Revolution Imminent? No – Not Yet (Without Incentives and Enabling Policies) But Policy Makers Need to Watch Key Drivers... ... and Lay Out Potential Strategies Going Forward
www.iea-retd.org
22
Potential Strategies Going Forward
To define a policy strategy, governments need to evaluate all drivers and balance opportunities and risks 1. Evaluate drivers and conditions
2. Balance opportunities and risks
Are the conditions in place to support nonincentivised consumer scale-up?
Given the trade offs, is support for prosumers a national policy objective?
3. Define policy strategy www.iea-retd.org
23
Potential Strategies Going Forward
Prosumer strategies are required to sustain growth and to enable industry transition Prosumer Strategy Choices
1. Constrain prosumers
Restrictive policies to avoid structural changes to utility business and regulatory paradigms www.iea-retd.org
2. Enable prosumers
Enabling policies like compensation for surplus production and transparent interconnectoin rules
3. Transition to prosumers A
Incremental
B
Structural
New regulatory and policy approaches / paradigms for utility regulation and grid management 24
Potential Strategies Going Forward
Policies for Constraining Prosumers
1. Constrain prosumers
Restrictions on net metering or onsite consumption Restrictive roll-over policies for excess generation (i.e. how long can excess power be banked?) Increased customer charges or demand charges Standby charges for onsite generation
Regulations prohibiting onsite generation, or grid connection Rules prohibiting onsite storage Tax on self-consumed generation
Tax on solar system components
www.iea-retd.org
25
Potential Strategies Going Forward
Policies for Enabling Prosumers Connecting to the Grid Permission to interconnect
2. Enable prosumers Compensation for Electricity Fed into the Grid
Interconnection rules
Amount that will be compensated
Interconnection application and review fees
Compensation level: Above, at, below retail rate
Interconnection cost recovery
Certainty of compensation level: Fixed contracts, retail or wholesale compensation
Interconnection transparency
Feeding into the Grid “behind” or “in front of” the meter
Efforts to Reduce Soft Costs Remove or reduce cumbersome bureaucratic procedures Reduce or eliminate fees and costs
Support PV marketing efforts in order to reduce installer acquisition costs
www.iea-retd.org
26
Potential Strategies Going Forward
Policies for Transitioning to Prosumers Incremental approach Prosumer compensation mechanisms
Examples
Buy-all/sell-all arrangements or hybrids with net metering
Net excess generation purchased at full retail rate, or (in islands) at, or near, the avoided cost rate
Time-varying prices (this could be positive or negative, depending on the jurisdiction and level of PV penetration)
Pure volumetric tariffs ($/kWh), i.e. without fixed charges
Decoupling utility revenues from power sales
Lost revenue adjustment mechanisms or performance-based incentives
Allowing peer-to-peer power sharing
Encouraging new, prosumer-friendly business models
Shift electricity sales tax to other income sources
Tax incentives or credits for solar system components, or investments
Rate Design
Ratemaking Market Reforms Tax Reforms
www.iea-retd.org
3.A Incremental Transition to prosumers
27
Potential Strategies Going Forward
Policies for Transitioning to Prosumers Structural approach Innovative business models New product and service offerings New operational models
Emerging technologies
www.iea-retd.org
3.B StructuralTransition to prosumers
Examples
Utilities become neutral managers of grid infrastructure, brokers of new customer relationships, partners with prosumer service providers, or even financiers of prosumer infrastructure
Instead of selling electricity as a universal bulk commodity, utilities could make differentiated offerings based on individual requirements.
Selling specific “services” such as light, heat, or load management
Strengthened and more sophisticated grid operators
Distribution grids to adapt management mechanisms of transmission grids, e.g. locational pricing, forecasting, and real time visibility
E.g. smart grid infrastructure that will reconfigure the utility-customer relationship to be more integrated, interactive, and price responsive.
Utilities will have more visibility and control at the distribution level, customers more opportunities to react to electricity market 28
Potential Strategies Going Forward
Policies for Enabling Prosumers Connecting to the Grid Permission to interconnect
2. Enable prosumers Compensation for Electricity Fed into the Grid
Interconnection rules
Amount that will be compensated
Interconnect. application & review fees
Compensation level: Above, at, below retail rate
Interconnection cost recovery Interconnection transparency
Feeding into the Grid Connect “in front of” or “behind” meter
Certainty of compensation level: Fixed contracts, retail or wholesale compensation
Efforts to Reduce Soft Costs Remove or reduce cumbersome bureaucratic procedures Reduce or eliminate fees and costs
Support PV marketing efforts in order to reduce installer acquisition costs
www.iea-retd.org
29
Potential Strategies Going Forward
High-level framework for situating different jurisdictions in terms of their engagement with prosumers (1/2) Prosumer Scenarios
Drivers
Policies
Strategies
No Prosumers
Weak conditions, e.g. low retail electricity prices No policies or rules permitting interconnection or feeding into the grid No regulatory or policy strategies for addressing prosumer challenges Examples: The Gulf Cooperation Council member states Constrain Prosumers
✔
Good conditions for prosumers, such as high retail prices and low installed costs Policies or laws that specifically prevent prosumers or that penalize prosumer development through fines or taxes No policies or rules permitting interconnection or feeding into the grid No regulatory or policy strategies for addressing prosumer challenges Examples: Some Latin American and Caribbean (LAC) countries, Spain
www.iea-retd.org
30
Potential Strategies Going Forward
High-level framework for situating different jurisdictions in terms of their engagement with prosumers (2/2)
Prosumer Scenarios
Drivers
Policies
Enable Prosumers
✔
✔
Strategies
Conditions are in place to create a competitive environment for prosumers Enabling policies allow prosumers to rapidly emerge on a non-incentivised basis. Policy makers and utilities do not anticipate, plan for, or react to the challenges introduced by prosumers. Prosumer development conflicts with incumbent business models Examples: European countries that experienced PV booms during the past 5-10 years.
Prosumer Transition – Incremental and Structural ✔ ✔ ✔ Approaches Conditions and enabling policies are in place. Policy makers have identified clear objectives for supporting prosumers, near-term financial and technical boundaries and pathways to make the required grid infrastructure investments and support the development of alternative utility business models. Examples: Some jurisdictions have implemented incremental transition approaches, e.g. Hawaii. No countries have yet to articulate an integrated roadmap for prosumer scale-up. www.iea-retd.org
31
Conclusions
Prosumer scale-up will require policies to sustain growth and to enable industry and markets transition A prosumer revolution is not here yet. Support policies are currently the primary determinant of prosumer emergence. But major drivers, especially economic ones, are accelerating the case for prosumers.
Policy makers should duly evaluate drivers and conditions, as well as opportunities and challenges. And lay out the policies needed to enable and encourage prosumers. RE-PROSUMERS provides a framework to define thsese policies. www.iea-retd.org
32
Contact Website: www.iea-retd.org Contact:
[email protected],
[email protected]
www.iea-retd.org
33
33
THANK YOU!
For additional information on IEA-RETD Online: Contact: Report:
www.iea-retd.org
[email protected] http://iea-retd.org/archives/publications/re-prosumers-report
But – policymakers need to watch the drivers
A complex picture of drivers and national specifics influence the different stakeholder groups Drivers / Effect Stakeholders +
Prosumers Save money
+ + +/Economic
+/+/-
-
PV Supply Sector
Governments
Utilities
TSOs
Bring down costs of elec supply Propose the creation Seek the creation of of new jobs new jobs Seek security of supply
Grow through new Save on grid business models extension costs
Avoid costs of (keeping) incentives schemes Avoid losing taxes revenues
Avoid cannibalising Avoid increased existing business costs models Avoid lower revenues
Make (more) money
Self consumption ratio Own home fit for PV Own insolation level
-
www.iea-retd.org
The report provides a description and discussion of all drivers
35
But – policymakers need to watch the drivers
A complex picture of drivers and national specifics influence the different stakeholder groups Drivers / Effect Stakeholders + + +
Behavior
+/-
Prosumers Perceive PV as "cool" Increase sense of independence Show status and prestige Trust in local policies
PV Supply Sector
Governments
Utilities
TSOs
Action against climate Green its bottom change line
Green its bottom line
Capture political return (1 rooftop equals >1,5 votes)
Openness to change
Openness to change
+/+/-
Perceive as hassle/unsafe to install/maintain
-
www.iea-retd.org
The report provides a description and discussion of all drivers
36
But – policymakers need to watch the drivers
A complex picture of drivers and national specifics influence the different stakeholder groups Drivers / Effect Stakeholders +
+
Technology
Prosumers
PV Supply Sector
Governments
Differentiate through Possibility of doing it Take leadership more competitive oneself position offers Accelerate technology Interest for breakthroughs on the technology market (PV, smart grids, storage…)
Utilities
TSOs
Take leadership position
Take leadership position
Address supply concerns
Address supply concerns Address grid safety concerns
+ +/+/+/-
Address safety concerns
-
www.iea-retd.org
The report provides a description and discussion of all drivers
37
But – policymakers need to watch the drivers
A complex picture of drivers and national specifics influence the different stakeholder groups Drivers / Effect Stakeholders +/National Conditions
+/+/-
www.iea-retd.org
Prosumers
PV Supply Sector
Administrative Lobbying power burden Residential buildings fit for PV
Governments
Utilities
Existing regulatory Supply obligations framework Residential buildings Degree of fit for PV concentration Compensation structure Fit of existing infrastructure
TSOs Supply obligations Degree of concentration Compensation structure Fit of existing infrastructure
The report provides a description and discussion of all drivers
38
Policy Makers Need to Watch Key Drivers
… and national conditions can also impact prosumer development Available roof space
Rooftop space not a near-term limitation; rooftop PV could supply 20-40% of electricity demand in US and Europe
Share of rental property
Renters do not have an incentive to invest in PV; 30% rental property in EU vs. 35% in US
Electricity demand trends
Flat or declining demand increases competition between prosumers and other generators
Renewable energy development
Non-prosumer renewable energy development may “crowd out” prosumers
Existing grid infrastructure
Large, modern grids more able to absorb prosumers than small, old or remote grids
www.iea-retd.org
39