Future grid business model innovation: A prosumer-based cost-benefit framework for valuation of Distributed Energy Resources

Abstract

The electric power landscape is undergoing a profound change driven by a confluence of environmental concerns, economic forces, regulatory trends and significant advances in technology. The traditional electricity business model has been characterized by a centralized architecture where utilities deliver power from centrally coordinated generators and receive revenue based on volume of energy sales. The introduction of distributed generation and storage allows traditional consumers to not only consume, but also to produce, or store energy. The active participation of these so called “prosumers” transforms the traditional electricity business model and allows them to participate in the value chain by offering new services. However, how these capabilities should be valued and integrated into the overall system operation is unclear. There is a need for cost-benefit frameworks that provide stakeholders the insight they need to make informed investment decisions. This paper presents a prosumer-based, cost-benefit and business model innovation framework for valuation of distributed energy resources. The valuation framework is based on a decentralized, layered, architecture and multisided platform that continuously connects a network of prosumers and describes the value exchange among energy service providers and customers in business areas that will include not only traditional energy generation and delivery, but other related products and valued added services enabled by new technologies. The business innovation framework expands the prosumer-centered approach and includes grid objectives of ultra-reliability, economic optimization and sustainability. If properly implemented, the framework would provide electric utilities, energy service providers and prosumers the foundation to evaluate the net benefits of Distributed Energy Resources and how to maximize them.