Consumption and production of cleaner energy by prosumers

Abstract

As investments in small-scale energy generating systems, such as residential rooftop photovoltaics (PV), increase it is not clear how electricity generated from these systems affects energy consumption decisions such as the purchase of green electricity offered by electric utilities. We present two utility-maximization models to determine energy consumption and production decisions and conduct simulations to test the strength of relationships. The first model maximizes a prosumer’s utility function where the size of PV is exogenous. The second model presents a prosumer that makes decisions in two stages — utility maximization to determine energy consumption and net revenue maximization to determine size of the generation system. Results from the exogenous model suggest that while there is a positive correlation between PV system size and total energy consumption, the impact on green electricity purchases (non-negative) is very weak. When the prosumer optimally chooses her system size, the optimal size increases with electricity prices. These results have implications for achieving decarbonization goals through an energy transition.