Electricity market design for the prosumer era

1 Advances in electricity generation and storage technologies coupled with declines in cost, the planned roll-out of smart metering and favourable regulation have all led to a rapid increase in the number of consumers in Europe and the USA producing or storing electricity at home — through solar panels1, electric vehicles2, batteries3 or other means. In the UK, for instance, by the end of December 2015 more than 842,000 installations of solar panels provided an aggregate capacity of about 8,667 MW (ref. 4) and, if the country is to fulfil its expected potential, as many as 10 million homes in the UK may cover their roofs with solar panels in the next six years5,6. Overall, the global proliferation of solar photo voltaic (PV) panels has continued to accelerate, rising from a base of 3,700 MW in 2004 to more than 150,000 MW in 20147. By 2020, the European Union expects about €45 billion to be invested in 200 million smart meters for electricity and another 45 million smart meters for natural gas8. These will facilitate the integration of small and independent energy producers to the grid. At the same time, globally, there are emerging markets and possibilities for home storage solutions (including the recent launch of the Tesla home battery9) that, together with smart-vehicle battery-charging strategies, have the potential to improve the sustainability and efficiency of the electricity system, and increase customer benefits10. The up-take of electric vehicles also continues to intensify, with the International Energy Agency11 reporting at least 665,000 electric-drive light-duty vehicles, 46,000 electric buses and 235 million electric two-wheelers on the worldwide market in early 2015. Smart home and home automation technologies with a variety of integrated energy management components12–14 are also becoming more widespread. These technologies enable consumers to optimize their electricity use and match it with their needs and, when applicable, with their electricity generation and storage preferences, while saving money or energy in a simple way. The global home automation market in 2014 was valued at around US$5 billion and was estimated to reach US$21 billion by 202015. In an attempt to promote a future decentralized grid, in the USA the state of New York is implementing its Reforming the Energy Vision (REV) strategy to accelerate the penetration of microgrids, building integrated solar PV systems and household energy storage technologies16. Californian utilities are aggressively reformulating Electricity market design for the prosumer era