End-consumers Becoming Competition for Energy Utilities
Date: September 14th 2020
Author: Alenka Lena Klopčič
It is becoming more and more demanding to manage and balance demand and supply in real time without cutting power to customers in the middle of the heatwave, while the pandemic and the smoky air are forcing them to stay indoors. Therefore, California – and eventually the whole of the U.S. – needs to introduce more price-responsive demand via dynamic pricing: the meters are there and the technology to get prices-to-devices is waiting in the wings, said Ahmad Faruqui, principal of the Brattle Group in San Francisco, in a recent Florence School of Regulation (FSR) online debate on the future of energy utilities. Faruqui was referring to California’s blackout being a vivid reminder of what might go wrong in the future. He also talked about consumers also becoming another form of competition for energy utilities.For the future we need to know what we want, although the future itself is not really certain, said Clara Poletti of the Italian regulator in the FSR energy talk, mentioning the future role of the consumers transforming to prosumers. Where the future is going can also be seen by the early adopters, including when it comes to households as renewable energy producers, agreed Faruqui.
He also said that the innovation is more progressive in the wholesale markets, whilst the situation is somewhat different in the retail markets. Stephen Littlechild, a founding father of western retail competition, asked in the energy talk if the competition - especially in retail - is relevant at all or does it even make things worse? “It depends what we mean by the competition,” replied Faruqui, explaining that nowadays the ultimate competition comes from customers who have become another form of competition for energy utilities.
Faruqui said that California, for example, has not implemented dynamic tariffing, which would be welcome in order to balance demand and supply more efficiently. Why things don’t change is in a way “an enigma”, he said. Littlechild confirmed that in the regulation it is very difficult to get big changes such as these accepted, while Poletti added that it is hard to achieve acceptance of “volatility” as dynamic pricing among consumers. Therefore, consumers should be incentivised and there are different ways to get them to accept the dynamic tariffing, believes Faruqui.
However, almost every business he knows would like to take part in the solar business nowadays, whereas it is somewhat different in the energy efficiency services business, where “things don’t happen” because private businesses won’t go it alone and the public sector won’t take it upon itself.
This article is available also in Slovene.