What is Prosumer Value to Utilities?

Published: Mon 02 Mar 2015
A blog entry by Christine Hertzog

Contributed by:

Christine Hertzog
Managing Director
Smart Grid Library

Christine Hertzog's Blog

The Age of the Prosumer presents challenges for utilities accustomed to thinking of their customers in terms of kilowatthours consumed. The Smart Grid is responsible for these challenges, borne out of technology, policy, and capital innovations. These innovations are triggering many disruptions to the utility business model, and will eventually transform the historic dependency of electricity consumers on utilities into new prosumer relationships of interdependency.

Interdependency is the key distinction between a consumer and a prosumer and will be a significant factor in developing formulas to assess the total value of these relationships to utilities. A consumer is dependent on the utility and generates revenues. A prosumer has different value for utilities through an interdependent relationship in which the utility may rely on commitments to reduce electricity use (negawatt production) or supply electricity to the grid (kilowatt production) at specified times. At other times, the prosumer may be reliant on the utility to supply kilowatts.

The calculations of prosumer value are explicitly impacted by regulatory policy. Consider two different state regulatory commission decisions in 2014. In March the Minnesota Public Utility Commission approved a process to create the first “value of solar” tariff. This tariff includes non-traditional calculations such as the offset costs of other forms of electric generation and environmental considerations. In late December the Arizona Commerce Commission allowed two regulated utilities, Arizona Public Service and Tucson Electric Power, to offer programs that essentially let them seek authorized use of customer rooftops to deploy rooftop solar generation assets.

These two decisions herald the first steps that utilities will make to develop definitions of prosumer value that are unique to their business environments. Where another business sector may be satisfied with analyses of demographic and behavioral data, utilities must include geographic data, weather data, and solar irradiance data correlated with grid operational attributes and performance data to build a value of solar tariff. Similar data can help create prosumer value assessments.

In the Arizona scenarios, data analysis of this type will help determine if a certain number of rooftops outfitted with solar along a distribution line can postpone an expensive grid upgrade. The owners of rooftops with excellent solar potential on congested lines will have very different prosumer values to a utility than owners of rooftops with similar solar potential that are connected to areas of the grid that are problem-free.

Prosumer value will be different for each utility. It is also dynamic, with variable rates of change for key factors in formulas. While an address is fixed on the grid, the occupants at that address change, and their load patterns change too. Rooftops and vegetation change. Grid assets have always changed over time, along with the loads on them. The challenge for utilities is that the numbers of assets and variables that impact grid operations will vastly increase. Simulation applications can assist in creating different scenarios that become the frameworks for consumer or prosumer valuations. Today utilities benefit from condition-based maintenance – a predictive analytics approach to asset performance. Similar methodologies can contribute to prosumer value definitions by modeling historical consumption trends and correlating that data with projections for production to create predictive reports about multiple asset generation capabilities.

The Age of the Prosumer has profound implications for utilities as they venture into defining and managing new interdependent relationships with dynamic prosumer valuations. Smart Grid technologies, particularly sensing, communications, and analytics will play critical roles in defining and managing prosumer values as well as the assets that create these new values.

Christine Hertzog

Smart Grid Library