The best defense is a good offense: Prosumer communities as a
business strategy for electric utilities
Juliana Zapata Riveros Merla Kubli Silvia Ulli-Beer
Zurich University of Applied Sciences, University of St. Gallen, Zurich University of Applied
Institute of Sustainable Development, Tigerbergstrasse 2, CH-9000 St. Sciences, Institute of Sustainable
Technoparkstrasse 2, Gallen, Switzerland Development, Technoparkstrasse 2,
CH-8401 Winterthur, Switzedand Zurich University of Applied CH-8401 Winterthur, Switzerland
Telephone: +41589344785 Sciences, Technoparkstrasse 2, Teton 441589344734.
Enmail:Juliana zapata@zhaw.ch (CH-8401 : ch
Telepire: 441589347259
Email:kubm@zhaw.ch
Keywords: Prosumers, Prosumer Community, Business models
Introduction: The increasing decentralization tendency is empowering consumers to generate their
own electricity (becoming so called prosumers) and consequently to reduce their energy demand from
the grid. Besides self-consumption of locally produced electricity within individual households more
advanced concepts such as “prosumer communities” have been developed. A “prosumer community”
is a group of households that are organized together to deploy energy froma common
generation system such as a photovoltaic (PV) panel. A common example is the case of multifamily
houses, where the electricity produced in the roof can be used and shared among several housing units.
This paper investigates the diffusion of prosumer communities and answers the following questions:
How can the traditional utilities react to prosumer communities? And how can they adapt their business
strategy in order to maintain their competitiveness?
Model description: The model considers four consumption concepts. The conventional “Grid
consumer” the “Classic Prosumer’. The “Communal Prosumer” and “Communal Consumers” who
belong to the “Prosumer community”. The figure below represents the causal loop diagram of the model.
The “self-consumption feedback loop” models the customer decision by comparing the utility of the
different consumption concepts. The utility of a concept considers among other factors the perception
of the economic benefits. To evaluate and compare the near term economic benefits of the different
consumption concepts we use the prosumer electricity unit cost (PEUC) developed by (Pillai et al.,
2014).The “Battery adoption feedback loop” the installation of batteries from a techno-
economic point of view. The “Scarcity feedback loop” represents the scarcity effect arising from the
maximum PV capacity that can be installed in the analyzed area.
Additionally, the influence of the network effect related to the decision of house owners to install a
photovoltaic power plant as represented by the “peer effect feedback loop”. We use the empirical
insights from (Bollinger and Gillingham, 2012) on the influence of peer effects on the adoption of PV
panels and the model structure (Kubli and Ulli-Beer, 2016) to simulate peer effects.
A comparable structure is used in the “membership effects feedback loop”. This reinforcing feedback
loop represents the “community identity” that accelerates the adoption of the prosumer community
concept.
Business model strategies: In this work, we examine different business strategies that can be used by
utilities as a response to the emergence of prosumer communities: a business as usual (BAU) strategy,
a policy resistance strategy and a new business strategies.
The BAU strategy is a wait-and-see strategy in which the utility takes no action while the customers
decide to organize new “prosumer communities”. In the policy resistant strategies, utilities can take
several measures such as decreasing the feed-in tariff to slow down or the development of decentralized
generation.
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Gri Tassic ‘ommunal]
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Scarcity Set \ ay
Share of prefecences shareot A" tedback a, feedback | \A consumeton | A adopton
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Fiancial
attractivness storage
Berceived Peer effect Feeling of
Uti membership
Investment cost
storage
Scarcity
effect
Perceived economic
benefit per concept
Electricity fetal
price Additional self
consumption share
PEUC Total Self with batteries
consumption share
Feed in py investment
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Finally, the new business strategies analyze the implementation of three different business models. First,
we consider a roof rental scheme in which the utility rents free roofs and installs PV systems on them.
The house owners as well as the tenants are encouraged to use the electricity that is directly generated
on their roof. A second strategy evaluates the role of the utility as service provider for the prosumer
communities. The last option considers the effect of partially financing the upfront costs of the PV
system by the utility company, which is traded against the surplus electricity.
Results: The results provide evidence that the development of prosumer communities will surge in the
following years. We show that utilities can react to this electric decentralization by implementing
resistance strategies such as reducing the feed-in tariff. However, these strategies can only slow-down
the diffusion of PV; they will not prevent it.
For this reason, we examine different business strategies that utilities can consider to obtain a better
financial position, while at the same time promoting the formation of prosumer commumities.
Comparing the revenues from the resistance strategies and the different business strategies shows that
the development of new business areas in the decentralization field could lead to higher financial
benefits than the attempt to block the diffusion of PV. This indicates that a good defense for the utilities
against the decentralization threat is a good offense. This means that incumbent utilities can improve
their competitive position by adjusting their business model and actively participating in the
decentralization of the energy system.
References
Bollinger, B. and Gillingham, K. (2012) ‘Peer Effects in the Diffusion of Solar Photovoltaic Panels’,
Marketing Science. INFORMS, 31(6), pp. 900-912. doi: 10.1287/mksc.1120.0727.
Kubli, M. and Ulli-Beer, S. (2016) ‘Decentralisation dynamics in energy systems: A generic simulation
of network effects’, Energy Research & Social Science, 13, pp. 71-83. doi:
hittp://dx.doi.org/10.1016j.erss.2015.12.015.
Pillai, G. G., Putrus, G. A., Georgitsioti, T. and Pearsall, N. M. (2014) ‘Near-term economic benefits
ym. grid-connected residential PV (photovoltaic) systems’, Energy, 68, pp. 832-843. doi:
hittp://dx.doi.org/10.1016f.eneryy.2014.02.085.
