Is Unbundling Electricity Services the Way Forward for the Power Sector?

About the Project

The Utilities of the Future project focuses on how new technologies in DERs are transforming customer/provider relationships. Advances in distributed generation technologies and associated cost reductions are providing customers with potentially attractive alternatives to standard electric utility service, perhaps turning them into ‘prosumers’. Utilities around the world are re-evaluating their business models, and regulators are considering multiple market reforms. The project aims to develop analytical tools and techniques to help address the key market, regulatory and energy policy issues in a power sector with high penetration of DER.

Key Points

High penetration of distributed energy resources (DERs) will lead to further fragmentation of the power sector, both in the services offered and its value chain. The ‘‘local’’ component of energy policies will probably become increasingly important. 

Electricity supply has multiple attributes, each valued differently by consumers. DERs eliminate opportunities for implicit cross subsidy between these. 

Successful new business models would find a way to monetize the value of each of these attributes, separately, according to the consumer’s preferences, without increasing transaction costs. 

The principles of what is known as the ‘‘sharing economy’’ could be applied to redefine products and manage the fragmentation of the industry without increasing transaction costs. 

There is a risk of technological lock-in unless regulators stay abreast of innovations in the industry and act to prevent this.