Consumers in Power Markets Will Soon Change the Industry
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Consumer-Driven Power Markets are reshaping electricity with transactive energy, demand response, DERs like rooftop solar, storage, and EVs, altering wholesale-retail dynamics, pricing, and regulation while spawning new business models and competition.
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Markets where consumers trade electricity via transactive energy and DERs, reshaping pricing and grid operations.
Consumers act as suppliers via demand response and distributed generation.
Prices emerge from supply-demand conditions, not fixed by regulators.
Enables peer-to-peer trading and utility-scale aggregation of prosumers.
Requires new grid investments, market rules, and cybersecurity safeguards.
MCLEAN, VIRGINIA - The role of consumers as competitive suppliers in power markets will greatly increase in the near future.This will significantly change the electricity industry, creating new business models and intensifying electricity competition and conflict. The electric power industry and its regulators will need to confront these changes now and make smart—but difficult—decisions in order for businesses to survive and thrive.
Markets that enable consumers to buy and sell electricity are being created across the country. Consumer participation in these markets will have profound impacts on the business of electricity and will set up new competitions and conflicts.
Consumers empowered by new technologies are seeking to take advantage of opportunities in these markets. Demand response, solar energy and other types of on-site generation, energy storage, electric vehicles, and the internet are combining to create these significant new opportunities as utility trends accelerate across the sector.
A new report by Bluewave Resources, LLC, “Rising Power: How Customer Participation in Power Markets Will Change the Electricity Business,” explores the power markets of the future and the business models that will be created for those markets.
Several types of markets are being created, including “transactive energy” markets in which consumers trade among themselves. These markets will be very different from today’s markets for consumer solar-generated electricity in that prices will be set by market conditions, not by regulators.
Jeff Price, Managing Partner of Bluewave, said, “Policy makers, regulators, and industry must make numerous difficult but crucial decisions as customer participation increases. Recent intense disputes over federal versus state jurisdiction and the price paid to homeowners for solar-panel-generated electricity are just the beginning of the disputes that are likely to arise.”
One critical issue sure to arise is how the many consumers who do not participate in these markets will be impacted. Different state retail markets in the same wholesale power market could also easily create a market reshuffle and significant disputes.
The report describes 21 business models and variations that could emerge in future power markets, including how utility revenue might evolve when electricity is effectively free in some scenarios. How these business models will perform will depend on as-yet unmade decisions, difficult-to-predict market conditions, and customer behaviors.
Electric distribution will need to change considerably. All this will require increased investment even as electricity demand is flat, pressuring traditional utility finances.
Where will this investment come from and who will pay?
The electric power industry is on the verge of major change. Smart but difficult decisions by both
government and industry will need to be made soon. Lack of decisions could weaken state
regulation, create further disputes, and seriously challenge the entire electric power industry.
