Sta­t­ic kWh pric­ing” in the new world of ener­gy

Elec­tric­i­ty retail­ers are faced with the dilem­ma that cus­tomers are nei­ther inter­est­ed nor excit­ed by their prod­uct. To blame – at least in part – is the “sta­t­ic price per kWh”. Smart meter­ing sys­tems won’t be able to solve this prob­lem. They will, how­ev­er, sup­port the design of new prod­ucts and ser­vices with­out cus­tomers hav­ing to break out of their com­fort zones.

 Cus­tomers aren’t inter­est­ed in elec­tric­i­ty

Vari­able elec­tric­i­ty rates are one of the great cure-all promis­es of meter­ing and mea­sure­ment sys­tems. Elec­tric­i­ty cus­tomers should con­sume ener­gy when it’s most afford­able. If, how­ev­er, we take a good look at the “cus­tomers”, we see that they are not used to hav­ing to think about and con­sume ener­gy in a flex­i­ble yet dynam­ic man­ner. Instead, their mea­sure­ment tool for ener­gy is the “sta­t­ic price per kWh”. Cus­tomers are used to being able to plug into an out­let and always have elec­tric­i­ty avail­able to them at a con­stant price all the time. Whether they are will­ing to think and act flex­i­bly and dynam­i­cal­ly at all remains to be seen. One thing is for sure: the old pow­er sys­tem and all par­ties involved have taught cus­tomers to con­sume elec­tric­i­ty with­out ask­ing any ques­tions. Smart meters are not attrac­tive for con­sumers, with hard­ly any of them ever even look­ing at the devices or the cor­re­spond­ing apps.

No incen­tives for flex­i­ble elec­tric­i­ty rates?

The ques­tion of costs at least should be crit­i­cal­ly exam­ined when we look at the incen­tives that cus­tomers find when they want to use flex­i­ble rates. Today, only one quar­ter of con­sumer elec­tric­i­ty costs are gen­er­at­ed by the mar­ket. The remain­ing costs are gen­er­at­ed either direct­ly by tax­es and oth­er levies or are reg­u­lat­ed like net­work costs – in oth­er words, they are induced by the state.

Fur­ther costs, such as for sup­ply and mar­gin, weigh on the last quar­ter “mar­ket” in the elec­tric­i­ty price, which leads us to ask the ques­tion: Are we real­ly cre­at­ing a cost incen­tive for elec­tric­i­ty cus­tomers to aban­don their learned behav­ior? Even with the great­est opti­mism it’s hard to answer this ques­tion in the affir­ma­tive. Yet, flex­i­ble elec­tric­i­ty rates are essen­tial to the suc­cess of the ener­gy tran­si­tion. Being able to flex­i­bly man­age pow­er con­sump­tion and there­fore par­tial­ly influ­ence the load on the elec­tric­i­ty grid is fun­da­men­tal­ly impor­tant for the elec­tric­i­ty sys­tem of the future and ulti­mate­ly sec­tor cou­pling.

The role of cus­tomers is chang­ing, but will their behav­ior too?

The increas­ing decen­tral­iza­tion of self-pro­duced elec­tric­i­ty is trans­form­ing elec­tric­i­ty con­sumers into active par­tic­i­pants on the elec­tric­i­ty mar­ket. In the long term, up to five mil­lion roofs in Ger­many could be equipped with solar sys­tems, which will all require con­trol func­tions. The Inter­net of Things and elec­tro­mo­bil­i­ty are also increas­ing­ly gain­ing a foothold in the domes­tic realm, there­by cre­at­ing new oppor­tu­ni­ties for the dis­tri­b­u­tion of ener­gy. If we recall, cus­tomers are not engaged and show a lack of inter­est. Retail­ers can cap­i­tal­ize on this atti­tude if they cre­ate offers that enable cus­tomers to use decen­tral­iza­tion and IoT tech­nolo­gies with­out ever hav­ing to actu­al­ly deal with them them­selves.

Retail­ers are becom­ing ser­vice providers

Cus­tomer demand will shift towards ser­vices that com­bine mobil­i­ty, ener­gy effi­cien­cy, and telecom­mu­ni­ca­tions into a use­ful sys­tem. Smart meters allow just that. Using gate­way func­tions, they make it pos­si­ble to lever­age the added val­ue of IoT tech­nolo­gies and decen­tral­ized sys­tems and to bun­dle them into offers.

Flex­i­ble rates can then by all means be car­ried out in the back­ground. Flex­i­ble loads of res­i­den­tial cus­tomers and pro­duc­tion facil­i­ties can also be used flex­i­bly and opened up to the grids to con­tribute to Germany’s ener­gy tran­si­tion. Retail­ers are becom­ing ser­vice providers “front of the meter”, i.e. with respect to cus­tomers, and flex­i­bilty mar­keters (e.g. aggre­ga­tors) with respect to the ener­gy mar­ket “behind the meter”. Smart meter­ing sys­tems serve as a con­trol and com­mu­ni­ca­tion inter­face between the two seg­ments.

Adapt­ing to con­sumer behav­ior

Cus­tomers must not, can­not and should not ever be involved. In terms of tech­nol­o­gy, this sit­u­a­tion is most like infor­ma­tion and com­mu­ni­ca­tion tech­nol­o­gy: the major­i­ty of users do not know how com­put­ers or smart­phones work. They sim­ply want to use them with­out hav­ing to deal with oper­at­ing sys­tems or instal­la­tion pro­ce­dures. If something’s not work­ing they sim­ply con­tact a pro­fes­sion­al.

In terms of dis­tri­b­u­tion, much can be learnt from mobile ser­vice providers. They cou­ple end-user devices with ser­vices and rates. They take over the com­plex tasks from their cus­tomers. Ener­gy retail­ers can do this too. IoT end-user devices, ser­vices and final­ly the com­mod­i­ty price are sim­ply pro­vid­ed, and the ser­vice provider takes care of the com­plex job of con­nect­ing, man­ag­ing and flex­i­bly adapt­ing every­thing.