MarIus

5 The expansion of the prosumer concept

Several of the academic definitions of the prosumer include activities that are neither production nor consumption, such as demand response, energy efficiency and grid services. These definitions are examples of a trend in the literature to expand the concept of the prosumer. Taken on their own, these activities relate to the active consumer, rather than to the prosumer.

The active consumer is a consumer who makes active decisions related to his energy consumption, i.e. a consumer who engages in demand-side management. As we have already seen, the prosumer is a market participant who both produces and consumes energy, and consequently engages in both supply and demand management. This means that all pro-sumers are also active consumers. Conversely, all active consumers need to undertake production activities in order to be considered prosumers.

Strictly speaking, there is a clear delineation between these two concepts, based around the necessity to engage in production activities. In reality, however, there are several arguments that justify a partial or complete overlap between the active consumer concept and the prosumer concept.

First of all, production and consumption are not two opposites, but rather two sides of the same coin.(1) Kaisa Huhta, ‘Prioritising energy efficiency and demand side measures over capacity mechanisms under EU energy law’ 2017 35 JENRL 7, 10. It makes no difference to the electricity system whether a participant reduces his reliance on the energy grid by increasing his own supply of energy by 10 KWh through own generation, or by reducing his demand by 10 KWh through demand response. The effect is the same: the person in question takes 10 KWh less electricity from the grid. Applications of this principle can be seen in the creation of a level playing field between supply- and demand-side measures in capacity mechanisms,(2) Capacity Mechanisms Working Group, ‘The Participation of Non-Generation Ac­tivities, Demand-Side, and Storage in Generation Adequacy Measures’ (European Commission 2015) <http://ec.europa.eu/competition/sectors/energy/capacity_mechanisms_working_group_4.pdf> accessed 18 November 2017. and the intention of the European Commission to treat energy efficiency as an energy source, representing the value of energy saved.(3) European Commission, ‘A Framework Strategy for a Resilient Energy Union’ (n 1) 12.

Secondly, we posit that all acts of demand-side management — the defining element of the active consumer — are also forms of prosumption.(4) Stamatis Karnouskos, ‘Demand side management via prosumer interactions in a smart city energy marketplace’ (2nd IEEE PES international conference and exhibition on innovative smart grid technologies, Manchester, 2011). By its very definition, prosumption combines supply and demand management within a single personage. There is an evolution to a situation where prosumers will switch fluently between different technologies, to the extent that there will be a continuous management of energy that integrates elements of all these activities. The distinction between the activation and non-activation of these activities will be reduced. For example, there will no longer be clear demand response events, but rather a continuous adaptation of demand to supply. Accordingly, it is more useful and more accurate to talk about different levels of prosumer interaction, rather than different forms of demand-side management.

Thirdly, some authors include the provision of services to the grid, such as balancing services, in the prosumption concept. At first sight, these services stand apart from the production-consumption dichotomy. However, all services provided by participants to the grid can ultimately be defined as either a production or a consumption of electricity. In the case of balancing services, the service rendered is simply a swift adaptation of the prosumers’ production/consumption routines to the changing circumstances of the electricity grid. A responsive energy storage system can provide frequency response services by quickly storing or releasing energy.(5) David Greenwood, Khim Lim, Haris Patsios et al, ‘Frequency responsive services designed for energy storage’ (2017) 203 Applied Energy 115.

Finally, the role of energy storage cannot be clarified through the strict production-consumption dichotomy. Energy storage is a zero-sum activity, as it does not produce or consume energy, but merely moves energy in a temporal dimension. Given its increasing importance, the difficulties of including energy storage in the producer-consumption framework plead against the continued applicability of this dichotomy.

We propose the following solution. Instead of the classical producer-consumer dichotomy, we advocate classifying prosumer activities according to a trichotomy of positive generation, negative generation and reduced consumption. By positive generation, we mean increasing the supply of electricity in the grid. This can be done by selling electricity back to the grid or by P2P trading. Negative generation means reducing the demand of electricity in the grid. This can be done through increased generation for own use. In a situation of reduced consumption, the aggregated energy demand is reduced. Examples are demand response and energy efficiency measures.

The key difference between negative generation and reduced consumption is that negative generation does not reduce the overall demand for energy, but merely moves the source of the energy to a location behind the meter. Through negative generation, an entity can reduce its reliance on the grid, without changing its energy use behind the meter. Negative generation is somewhat paradoxical, as it is simultaneously an increase in production and a decrease in consumption. The solution to the paradox is that these two actions take place on two different sides of the meter.

This trichotomy can also accommodate energy storage, albeit as two different actions. Energy storage can be a form of positive generation, if the energy stored is fed back into the grid at a later point in time, or negative generation, if the energy stored is used for own use (thereby reducing the need for power from the grid).

With short term and long-term measures, we point to the length of the activity undertaken. Typical prosumer generation capacity cannot be easily switched on or off. For that reason, generation is classified as a long-term activity. The state of energy storage, on the other hand, depends on the balance between supply and demand and the market price and is therefore a short-term activity. The modalities of peer-to-peer (P2P) trading are still being developed. While P2P trading could in theory be used both as a short-term and as a long-term activity, it remains to be seen whether both of these forms will be used in practice.