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What exactly is a 'prosumer'?

The more people generate their own electricity from renewables, the less the distinction between producers and users of electricity holds true. 'Prosumers' are becoming increasingly important to the success of the energy transition. But what exactly is a prosumer? And how does the energy transition benefit consumers?

It's about shaping the energy transition and benefiting from it

Would you rather buy your salad in a supermarket or grow your own? It doesn't matter which option you prefer. If you can do both, you're a 'prosumer'. Prosumers are people who are able to both produce and consume a certain product and who therefore can't be pigeonholed into one or either category. Especially if they sell their home-grown produce to their neighbours.

In the context of the energy transitions, the same concept applies to electricity from renewables. There are consumers who buy electricity whilst also generating power from their rooftop PV installations and feeding this into the grid. Similarly, there is a trend towards using heat pumps and solar thermal installations to generate heat at home. This is an option that is becoming ever more attractive. In a nutshell, the energy transition is putting an end to the old dichotomy between producers and consumers of electricity and heat. Instead, we now have prosumers who can do both.

Consumers turned prosumers

Consumers turned prosumers take on an active role on the energy market. Let's take a closer look at how this works by using the example of a private household that has a PV installation fitted on its roof. If a cloud moves and obscures the sun at a moment when the household needs a lot of electricity, the household will have to buy electricity from the market. By the same token, any surplus electricity generated by the solar installation will be fed into the grid, turning the household into a very small energy company. But that's not all. Given that electricity from renewables is climate-friendly, consumers turned prosumers not only derive a personal benefit from the energy transition, they also play an important part in us meeting our climate targets.

The future will be all about flexibility

It does not even take a roof-top PV installation to become a prosumer. You can do your bit for the success of the energy reforms simply by using energy in a more flexible way. The idea is to use less energy when there is little of it available, and more when there is a lot of it. The amount of electricity that is generated from renewables will always vary depending on the weather and the wind conditions. That's why we need to adapt. Why not start the washing machine or recharge your electric car when there is a lot of electricity being generated? Once the necessary conditions have been put in place, consumers will soon be able to help keep the entire power system stable, which in turn is key to our energy security. And the good work might even save you cash. This is provided that utilities start to offer tariffs that reflect the supply situation. This would mean that prices should be lower at the hours of the day when electricity is readily available and low in demand, and higher when there is little supply and high demand. Once these tariffs are in place, setting your washing machine to start at a time when electricity is cheap will save you hard cash.

Digitisation + the electricity market 2.0 = good times for prosumers

For the scenarios described above to work in practice, the energy reforms will have to go digital. It's not that we don't have the technology. Smart meters, smart appliances, and smart grids are all available. What we now need to do is to roll out these technologies and make sure that they interact in an intelligent way. A new law, the Act for the digitisation of the energy industry (in German only) is to create the right legal framework for this. Smart meters help integrate power from renewables into the electricity market and match supply and demand. Along with smart appliances they open up new opportunities for prosumers. In a smart home, the household's energy consumption is visualised and made transparent, energy can be used more flexibly, and all this also motivates people to cut their energy consumption.

Last autumn, the Federal Cabinet also approved the draft for a new Electricity Market Act setting out the basic principles of what is called the 'electricity market 2.0'. This new electricity market is to be more market-based and to provide for greater flexibility within the entire power system. It is to ensure an efficient supply of electricity even as the share of renewables continues to grow. At the same time, it is to guarantee a high level of energy security. The Electricity Market Act (in German only) is to enter into force before the end of this year.