As a result of the efforts to address climate change, there has been an increase in the use of renewable energy sources like solar panels and windmills. This has enabled consumers to produce their own electricity and become "prosumers". Although this shift towards renewable energy sources has made the energy sector more resilient, it has also resulted in unintended consequences. This includes prosumers relying less on the bulk electricity market, which has brought about new challenges.
The concern is that as more traditional consumers become prosumers, the energy sector may struggle to recover the costs of maintaining the infrastructure and providing routine services, leading to a "death spiral" where transmission charges are raised for traditional, grid-dependent consumers. However, the impact of this shift on transmission charges and the market has not been thoroughly investigated yet.
Professor Ryuta Takashima from Tokyo University of Science, Japan led a team of researchers to investigate the impact of prosumers on energy transmission charges and the market. Their findings were published in the Applied Energy journal on 15 February 2023, and the study also involved the contributions of Professor Yihsu Chen from University of California Santa Cruz, USA, and Professor Makoto Tanaka from the National Graduate Institute for Policy Studies, Japan.
In their study, the team used a model of competition developed by Benjamin F. Hobbs to simulate how the energy market works. They included the energy transmission network and considered how different groups, such as consumers, prosumers, producers, and independent system operators, make decisions about energy production and consumption. They specifically focused on prosumers and how they choose to produce and consume their own energy, whether in a perfect or imperfect competition.
The researchers used the PATH complementarity solver to tackle the market equilibrium problem they defined using the Karush–Kuhn–Tucker conditions from the above mentioned optimization problems.
Contrary to what many people think, the researchers discovered that the transmission charge does not always increase with the number of prosumers. When prosumers generate less electricity, they behave like regular consumers, resulting in a lower transmission charge. However, when prosumers generate a substantial amount of renewable energy, the transmission charge increases as expected.
The researchers found that transmission charges don't always increase with the number of prosumers. When prosumers generate less electricity, transmission charges can actually decrease. However, if prosumers generate a significant amount of renewable energy, transmission charges will likely increase. The team also noted that death spirals are more likely to occur when strategic prosumers reduce their energy consumption from the bulk electricity market under imperfect competition. As a solution, the team recommended implementing a per-MWh tax on prosumers' electricity consumption from the bulk market to reduce the likelihood of death spirals.
The study led by Professor Ryuta Takashima, along with Professor Yihsu Chen and Professor Makoto Tanaka, found that the transmission charge does not always increase with the number of prosumers as previously believed. The research also showed that strategic prosumers can increase the likelihood of death spirals. The team suggested that a per-MWh tax on the electricity consumption of prosumers from the bulk market could reduce the chance of death spirals. The study provides valuable insights into the relationship between renewable energy sources, prosumer behavior, and transmission charges. The findings can be applied to the Japanese electricity market to offer suggestions for its aversion.
Let us hope for a more robust electricity market with affordable transmission costs!