The increasing use of renewable energy sources requires more demand flexibility in order to balance the energy system. Also, our market is moving towards a new reality in which prosumers increasingly meet their energy demands locally.
Our current market model however dates back to the pre-renewables era and does not create the incentives needed to stimulate residential prosumers to share their flexibility. To the contrary, the model shows an extreme asymmetry when it comes to the balance between the residential price that can be received for production on the one hand and the residential price for consumption on the other hand. The prosumers are stimulated to use their flexibility to minimize the dependency on the public grid.
This market design bug will lead to lower grid operator revenue on the one hand and excessively increasing balancing and re-dispatching costs for system on the other hand. And as these costs are socialized with all grid users, prosumers will be motivated to reduce grid dependency even further.
This will not only create a reduction in grid use, but more important also decimate the availability of the distributed residential flexibility for the system. To maintain system balance, all kind of non-market based measures will be introduced to control production and consumption. This may lead to strict regulation of the retail energy market, decreasing system efficiency and overall increased energy costs.
In short, holding on to our current market model will lead to:
- Residential prosumers not sharing their flexibility and reducing their dependency on grid services
- Grid companies receiving less grid fees, while coping with increasing costs
- Supplier companies becoming less relevant to prosumers
- Overall increasing inefficiency costs of the renewable power system