SMIGHT

The rich can afford to produce and store their own energy yet still require a grid connection. The poor are footing the bill for this. All of this is driven by the fact that our grid fees are based on consumption. This must change!

The energy transition has seen the advent and proliferation of the so called ‘prosumer’ – this is a consumer who is also a producer (in contrast to the past where producers and consumers of electricity were always distinctly different). These prosumers can invest in their own production and storage facilities (mostly solar panels and domestic batteries) and thereby reduce the among of electricity they need to buy. The problem is: What we pay for the use of the grid is based on the amount of electricity we buy in total. This was fine when we were all consumers, however this no longer works when prosumers still require the use of the grid but use far less total electricity from the grid and therefore pay a much smaller contribution to the upkeep of the grid. The perverse thing that makes this even worse is that in fact these very same prosumers can actually creating higher loads on the network that lead to the need to reinforce the grid which increases the total costs.

Let’s say a well setup prosumer can cover 75% of their own consumption, this still leave 25% of their consumption needing to be covered by the wider electricity system. This isn’t 25% evenly spread every day, this will be periods where 100% of the prosumer’s demand needs to be covered by the grid. This means the grid needs to have just as much capacity as if the prosumer didn’t cover any of their own requirements. This in turn means the costs of running and maintaining the grid remain the same, however these costs will now be spread over a much smaller volume of total consumption i.e. if before in the year the consumer cost the network €100 and this was spread 1:1 over all the kWh of consumption, now with only 25 units of consumption this €100 cost is applied to the 25 units. In a world of only prosumers all behaving in the same way, this means everything remains in balance i.e. it costs everyone the same amount in total, but in the real world not everyone is a prosumer and not all prosumers behave in the same way.

The bigger issue here is for those who can’t afford to become a prosumer. To demonstrate this, we need to zoom out to the wider network. Let’s consider the oversimplified situation where a network has 1000 connections, 50% of which are customers who are consumers-only and 50% who are prosumers who are coving 75% of their need themselves. In the previous world where all were consumers-only the network capacity needed to be a nominal 1000 units and cost €10,000 per year. So, each consumer would be charged €10 per year for their use of the grid. In the new world the capacity and therefore the cost remains the same as the 25% of the prosumers demand still needs to be covered. However, now the costs will be spread across 625 units of consumption i.e. a cost of €16 per unit in comparison to the previous €10. So, the prosumer sees their costs fall from €10 to €4, and the consumers-only see their costs increase from €10 to €16. This is of course oversimplified; however, this dynamic is happening out in the market.

So, what should we do about it? This is really a political question and therefore sits with the government and regulator, but here are some ideas:

• Means tested subsidies for solar panels and battery storage i.e. help lower income households access the same technology that high income households can access.
• Feed in tariffs for solar systems and battery storage (in most countries when someone feeds their electricity into the grid, they are not charged for this usage of the grid yet they are causing a load that the grid has be to be able to handle)
• Fixed grid fees irrespective of total usage, perhaps coupled with maximum load. That way it is still an equitable system.