Group for Research in Decision Analysis

G-2019-100

Prosumers and energy pricing policies: When, where and under which conditions will prosumers emerge? A case study for Ontario, Canada

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The energy landscape is marked by a rapid emergence of electricity prosumers at all levels of the grid. While energy policy seems to be more adaptive to the needs of large-scale prosumers, it may be less concerned to accommodate the needs of small-scale prosumers. While their behaviour may be disruptive for the entire grid when their number reaches a certain threshold, scepticism about the feasibility and profitability of the disconnection mode remains. This paper contributes to the exploration of these issues by analysing the impact of billing policy on the profitability of investment in prosumer schemes, such as Net Metering and Off-grid, for the case of Ontario (Canada). We conclude that fast improvement of commercial storage technologies makes it possible for prosumer to become fully electricity self-sufficient even in locations with low availability of renewable energy sources. While the profitability analysis shows that Off-grid is not profitable in 2019 and will likely remain not profitable in 10 years, it reveals some important findings. The profitability of investment in Net Metering scheme is comparable with the profitability with Off-grid scheme in 2019. For Ontario, this means that a prosumer would need to triple his investment to switch from Net Metering to the grid-disconnected mode, but the profitability of this decision will be divided by two. Critical locations where consumers are more prompt for disconnection are characterised by a high share of fixed costs in the total electricity bill. The pattern of disconnection profitability increase matches with the pattern of fixed costs share increase showing that billing policy has a direct impact on consumers decisions. The profitability of disconnection increases faster with the increase of fixed charges. By comparing the three locations of Atikokan, Hawkesbury and Espanola, it was found that a five-fold increase in variable cost (with same fixed cost) increases the Off-grid profitability by 10% while a three-fold increase in fixed cost (with same variable cost) will increase the Off-grid profitability by 26%. If the shares of variable and fixed costs are maintained the same in the future, the profitability of Off-grid mode may almost double between 2019 and 2030. Moreover, if the cost trends of recent years are maintained, i.e., decrease of variable costs and increase of fixed costs, then the profitability of Off-grid mode will push electricity consumers toward disconnection.

, 33 pages