How renewables can start a consumer energy revolution

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Helena Leurent, Director-General, Consumers International

• With too many people struggling to pay their energy bills, it’s time to empower consumers to become energy producers, storers and sharers.
• The shift to clean energy offers an unprecedented opportunity to embrace consumer energy generation and create a new type of energy system from the bottom up.
• This will only be fully realized if consumers receive adequate legal recognition and financial compensation for playing their vital part.

Renewables are now the world’s most affordable energy. In fact, the latest solar panels generate cheapest electricity in human history. But hardly any households are seeing the financial benefits.

Many consumers are struggling to pay their bills. Driven by soaring fossil fuel prices, the ongoing global energy crisis is raising average household energy costs by as much as 120%.

As the shift away from fossil fuels collides with technical advances, this is humanity’s chance to reimagine the global energy system from the bottom up. At the 2024 Annual Meeting of the World Economic Forum in Davos, government and business leaders have a historic opportunity to collaborate on enabling the consumer energy revolution.

The consumer energy revolution

In 2022, 36 million households around the globe installed solar panels – a 50% increase in the world’s rooftop capacity. People are also installing energy storage systems that electrify how they heat and cool their homes, while electric vehicle ownership is soaring.

In total, household spending on clean energy measures – like solar panels, batteries, smart meters and electric heating and cooling systems – reached $184 billion last year. This is not only a 340% increase on the year before but – astonishingly – double the global government climate spend. Consumers are now the true climate leaders.

The ramifications are huge. Technological developments mean that equipment like solar panels, batteries and electric vehicles can be integrated into a single, smart household system that allows a property’s occupants to generate, use, store, save and share energy with ease.

Household systems can be linked to the grid, so energy doesn’t just flow towards consumers but the other way to

On a macro level, these household systems can be linked to the grid, so energy doesn’t just flow towards consumers but the other way too. When people have generated enough electricity to power their homes, they can sell any excess to the grid. Energy can also flow between consumers, with people sharing extra electricity with other households.

The old ‘command and control’ model – in which energy is generated at power plants and distributed via national grids – is a thing of the past. The shift to renewables is our chance to create a new energy system, in which consumers aren’t just users – but designers, producers and traders too.

New business models

Change is already afoot. The emerging, consumer-led energy economy is ushering in a new generation of business models. For a start, energy suppliers are offering a range of dynamic tariffs that charge consumers less for using energy outside of peak times. Meanwhile, ‘one-stop-shops’ for consumer renewable energy systems provide advice, details of accredited suppliers and signposting towards financial support.

Moreover, new energy aggregators are using cloud technology to create networks of consumer assets – like electric vehicles, heat pumps, home appliances and batteries – that can be flexibly charged to meet the grid’s needs.

One Australian utility company, for example, has looped together 276,000 home solar panel systems so people can share their energy. Known as virtual power plants, such consumer networks can provide the same functions as a traditional, fossil-fuelled power plant – without the carbon emissions and air pollution. We now need these kinds of innovative models to become standard.

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Rewarding consumers

For the consumer energy revolution to achieve its potential, it’s vital that consumers are adequately financially compensated. Firstly, it’s just a matter of fairness: when people take on new responsibilities (such as using energy at off-peak times, supplying electricity to others and offering their devices to support grid management) they should clearly be provided with something in return.

Secondly, paying people fairly is how to optimize the energy system. Consumer technologies can only be an asset if they react flexibly, in different ways at different times. For example, if too many homes export the energy from their solar panels on a sunny day, the sheer volume of energy could make it harder for the grid to balance supply and demand. To incentivize consumers to take the right actions at the right time, they need price signals that reflect the current value of additional electricity.

Building the consumer stack

People still don’t really understand the full financial benefits of renewable home energy systems, which is why we’ve identified four main savings and revenue streams that can be built into a ‘stack’:

• Nearly all consumers could enjoy savings of up to 30% by upgrading the energy efficiency of their appliances and homes, through measures such as insulation.
• Not only can homeowners with solar panels save on their bills, they can also sell electricity to the grid or other consumers.
• People can earn income for the provision of grid services via a ‘virtual power plant’.
• People with smart meters and/or home energy management systems can enjoy further opportunities – including savings from shifting consumption on a dynamic price tariff. The greatest benefit is for those with an electric vehicle. By 2030, smart charging could mean that the average European electric car owner saves 176 euros a year.

The full financial benefits of renewable home energy systems

Legislation and innovation

Before they can enjoy the full ‘stack’ of financial benefits, many consumers around the globe will have to wait for new government policies – primarily the reform of electricity pricing regimes.

They also need the corporate world to create the new business models that will unlock greater financial benefits for them, such as direct peer-to-peer electricity trading or apps like Enact, which helps people track renewable energy system savings.

This is our chance. The home-generated energy revolution is how to cut consumers’ bills and emissions, while also making our energy system fairer.

It’s time for the world’s political and business leaders to put energy in the hands of the people.

See the World Economic Forum’s recently launched special report on Building Trust Through an Equitable and Inclusive Energy Transition, which underscores the
importance of consumer protection and empowerment to counter inequitable outcomes and bridge gaps between key stakeholders.

The report underscores the importance of governments empowering consumers
to make informed decisions and collaborate for a meaningful energy transition. This involves providing the necessary choices, tools, infrastructure, and an enabling environment to reduce the burden on consumers, helping them understand available options and offering actionable steps and support.