Advancing at light speed- the march of the Prosumer

Published: Tue 18 Oct 2016
A blog entry by Alex Powar

Contributed by:

Alex Powar
Marketing Advisor
Baringa Partners

Alex Powar's Blog

I’m a Trekkie*. I’ll openly admit that. Show me Captain Kirk fighting Klingons and I’m content. Whilst watching the latest film I was struck by the starship’s fictional energy source, Dilithium crystals, which enables the ship to be entirely self-sufficient, indefinitely. A powerful (albeit far-fetched) concept, but is it actually that far from reality when the energy market’s current trajectory is considered?

A small section of consumers have taken advantage of technology developments (in particular Solar PV, heat pumps and battery storage) so that they are no longer solely reliant on importing energy from the grid, instead they produce enough to export back into it. So called ‘Prosumers’ generate income from selling their surplus, reducing the demand for typical energy generation methods and helping smooth peaks in system demand.

This benefits the individual and our energy system but there are three key barriers which must be overcome before Prosumer technology is adopted en mass:

  1. 1. raise market identity and brand awareness: Public perception currently sees self-generation as a niche product which only early adopters have capitalised on. Beyond this there is an image problem. Greg Smith, the senior technical trainer for battery-maker Sonnen highlighted that “the overwhelming portion of the systems we sell is for backup.” This will be defined in more detail in a later blog, but there is a learning curve that needs to be addressed so that Prosumers are kept at the heart of this energy transition
  3. 2. reduce upfront capital costs: In 2016 it cost approximately £6,000 per house to install solar PV plus an additional £2,000 for battery storage. This presents a significant barrier to entry for those with low disposable income. To achieve mass adoption the price will need to decrease further. The National Renewable Energy Laboratory’s (NREL) recent report on Solar PV costs provides reassuring reading; in the past seven years the total cost of installing solar PV reduced by 58 percent. To be economically viable for the next wave of prosumers, this must continue at a similar rate. Not an easy ask if the Swanson Effect is to hold
  5. 3. shift government policy to foster new technology: Tax and subsidies are hugely important in Prosumer technology adoption. The Feed-In-Tariff (FIT) introduced in 2011 bought energy at 19p/kW for every kW produced (whether it entered the grid or not) providing on average a Return On Investment (ROI) of approximately 12 years. Since then successive decreases in subsidy have reduced the rate to 4.85p/kW and have extended the ROI to 15 years despite significant reductions in upfront costs. This in turn has affected adoption rates; 40,000 applications/quarter in 2015 to 11,000/quarter in 2016. If the government doesn’t support prospective prosumers wishing to adopt self-fuelling initiatives, it will only reinforce the need for centralised energy generation such as Hinckley Point C.

The potential of the Prosumer Revolution is huge – cheaper householder energy costs, reduced strain on generation infrastructure and better load and loss management of the grid. But until customers are more aware of the benefits self-generation technologies provide and can access them more cheaply, the prosumer revolution will remain constrained.

For the time being Star Trek’s energy utopia is not a reality, however in our lifetime it could be. Strange to think, but the Dilithium plot device written in the 1960’s as a futuristic technology advancement 100s of years away is on the cusp of becoming a global standard.

This blog was written by George Lloyd, Senior Consultant, Energy and Resources, Baringa Partners.

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* Noun: a fan of the US science fiction television programme Star Trek.