Article

Timing-based business models for flexibility creation in the electric power sector

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Abstract

Energy policies in many countries push for an increase in the generation of wind and solar power. Along these developments, the balance between supply and demand becomes more challenging as the generation of wind and solar power is volatile, and flexibility of supply and demand becomes valuable. As a consequence, companies in the electric power sector develop new business models that create flexibility through activities of timing supply and demand. Based on an extensive qualitative analysis of interviews and industry research in the energy industry, the paper at hand explores the role of timing-based business models in the power sector and sheds light on the mechanisms of flexibility creation through timing. In particular we distil four ideal-type business models of flexibility creation with timing and reveal how they can be classified along two dimensions, namely costs of multiplicity and intervention costs. We put forward that these business models offer ‘coupled services’, combining resource-centered and service-centered perspectives. This complementary character has important implications for energy policy.

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... 17 Figure 5 Typology of value creation in the energy industry. Adopted from: (Helms, Loock and Bohnsack, 2016) Aggregator position as an intermediary is a key enabler for power system decarbonisation. ...
... Transaction cost is the cost of identifying, activating, connecting and communicating with the aggregated RES or aggregated loads (Helms, Loock and Bohnsack, 2016). Transaction ...
... aggregating few large-scale industrial load). The intervention cost is the cost of exploring the different, variant and specific consumption patterns, designing their relevant intervention mechanism and remunerating the customers for their behavioural change (Helms, Loock and Bohnsack, 2016). In the next subsection, the peer to peer BM is presented as a specific type of aggregation business models. ...
... Finding efficient solutions for system integration of solar and wind energy is a key challenge of energy transitions [1][2][3]. Practitioners as well as academics are constantly searching for new flexibility solutions [4][5][6][7]. In the last decade, installations of solar power and home batteries have risen at an incrementally and are expected to continue growing at impressive rates [8][9][10][11][12]. ...
... Fig. 2 displays the supply area of the utility company represented in this case study. 5 The target customers of the offered battery swarm are segmented into three groups (see the grey area in Fig. 3; the three flows that lead to the stock flexible prosumer represent the three pathways to join the battery swarm): (a) storage prosumers, who share their home batteries with the battery swarm; (b) prosumers, who upgrade their system with a home battery and provide flexibility and (c) grid consumers, who are offered a turnkey system with solar PV, a home battery and a flexibility contract. To benefit from the battery swarm, grid consumers and prosumers must also make additional investments in a battery, and solar PV in the case of the grid consumer). ...
... Once the flexibility premium increases again as a consequence of the now-accumulating profit, more prosumers are willing to join the swarm. In the absolute numbers for our case study, the SFH owners are by far the most common participants in the battery swarm, while commercial consumers make the largest 4 TREES stands for Transition of REgional Energy Systems. 5 Note that the supply area of the utility company is not entirely overlapping with the Canton of Vaud. The data basis used refers to the exact supply area of the utility company. ...
Article
Flexibility aggregation is seen as a promising solution to facilitate the integration of solar and wind power into the energy system. While the solution is well known, it remains fairly uninvestigated in terms of the components needed to result in a business success. This study investigates the long-term business dynamics of flexibility aggregators with a simulation model. Our study finds that new entrants in flexibility markets are likely to be trapped in a "technology valley of death" situation on account of being "too small to bid". Therefore, we test different strategies to overcome this critical initial phase. Diversifying revenue streams and introducing a leasing offer for flexible prosumers to enlarge the customer base are promising strategies to reach the relevant bidding size required to compete in balancing power markets. The analysis offers insights on the long-term uncertainties of the business case. The findings of this paper contribute to the discussion on how to develop functioning and robust business models for low-carbon flexibility. Furthermore, the study is of high practical relevance, as one of the burning questions for new entrants in flexibility markets is addressed with a concrete strategy analysis.
... If business model innovation addresses bottlenecks in such activity systems, this provides opportunity to innovate value creation and value capture. Second, digitalization-based business models are often pursuing an asset-light strategy [33]. Thus, digitalization-based business models do not stick with earlier investments or investments at a certain location or industry. ...
... Some of the current dynamics in the electric energy industry -the emergence of new technology (such as decentralized energy production) and the emergence of new stakeholders (such as private, sustainability-oriented investors) -are similar to the dynamics of other industries, as for instance discussed in the sharing economy [23][24][25]. But the changes in the energy industry are also specific: For instance, stakeholders in the energy industry are forced to share existing infrastructure, the electric grid and its respective physical requirements [e.g. the maintenance of a stable 50hz power level, see for instance 33]. ...
... Companies have developed new business models that combine a service (the timing of demand and supply) with valuable assets (e.g. power production plants) or steerable consumer behavior in order to provide flexibility to the electrical grid [33]. They help mitigating some of the challenges that follow from an increasing diffusion of fluctuating wind and solar power generation. ...
Article
Full-text available
Many researchers and practitioners in the energy domain look at business model innovation to find novel ways of creating and capturing value from digital technology. A key concern is to address problems and inefficiencies in the energy transition. In entrepreneurship such inefficiencies are referred to as bottlenecks. However, the profound potential that digital technology and business model innovation have to address bottlenecks in the energy transition is surprisingly under-researched. This paper contributes to this gap. It appears that digital technologies facilitate business model innovation that either tackle bottlenecks of integrating sustainable energy technology into incumbent structures or bottlenecks that relate to the independence of sustainable energy technology from incumbent structures. Further, business model innovation to address these bottlenecks are either incremental or transformative. As a result, digitalization-based business model innovation appears in four types. Each type stimulates novel prescriptions for business model innovation research and practice and the governance of sustainable energy transitions.
... It should be noted that the operation and control are key activities that aim also to optimize grid balance and electricity trading service and to provide maintenance to the co-owned infrastructure (Facchinetti and Sulzer, 2016). Operation and control are prerequisites in order to handle the fluctuation of renewable energy production and grid balance ( Frantzis et al., 2008;Helms et al., 2016). ...
... ( Bertoldi et al., 2006;Facchinetti and Sulzer, 2016;Helms, 2016;Helms et al., 2016;Loock, 2012;Overholm, 2015;Överholm, 2017;Richter, 2012;Sorrell, 2005;Wainstein and Bumpus, 2016) ...
... ( Bolton and Hannon, 2016;Facchinetti and Sulzer, 2016;Hall and Roelich, 2016;Hannon et al., 2013;Helms et al., 2016;Juntunen and Hyysalo, 2015;Richter, 2013;Süsser et al., 2017;Walker and Cass, 2007) ...
Thesis
Full-text available
The accumulation of greenhouse gases in the atmosphere, produced by human activities in the energy sector is one of the main causes of climate change. Therefore, the decarbonization of power systems has become an urgent need to mitigate the effects of climate change and achieve the energy transition. The share of renewable energy technologies has been increasing mainly due to the participation of new market players. Today, however, one of the great challenges is to maintain the electricity system’s balance and security despite the large amount of renewable energy resources connected to the grid. One of the approaches to deal with this issue and to increase power system flexibility is the Demand Response (DR). This thesis examines this new approach and shows the interest to rethink the relations between different stakeholders, to bring out new business models in order to deploy innovations for energy transition. The implemented research methodology in this thesis consists of a systematic literature review and an investigation of empirical data of 15 European energy start-ups. As a result, the thesis provides the research community with (1) a grouping method to classify different Energy Business Models (EBMs) and an initial synthesis of the EBMs identified in the literature; (2) a framework to analyse starts ups in the energy sector, completed with the analysis of 15 energy starts ups; (3) and a conceptual tool for DR innovation, known as the Demand Response Business Model Canvas (DRBMC), which includes 12 interrelated elements. This canvas aims at evaluating DR activities and supporting the emergence of new DR business models. These results can also help entrepreneurs explore new demand response market opportunities, enabling a better understanding and providing a simplified analytic framework of existing business practices.
... Furthermore, energy service contracting allows the service provider to sell service provisions such as lighting levels, room temperature, humidity and comfort (Sorrell, 2005). Recently, servitization has been used to refer to the transformation of the energy utility business model to a service-oriented BM to meet energy transition challenges (Helms, 2016), demand-side management (Helms, Loock and Bohnsack, 2016) and distributed generation (Boston Consulting Group, 2010;Överholm, 2017). Energy utility servitization, defined as the development of BM from simple commodity suppliers to comprehensive energy solutions that include consulting, installation, financing, maintenance and warranties (Richter, 2012), allows energy utility to decouple energy volume sales from revenue. ...
... Furthermore, multiple roles for consumers are described in the literature: "actives" consumers who self-consume green electricity; customers as "financial investors" in renewables; "service users" demanding light, heat, etc. instead of an energy commodity; "local beneficiaries"; project "supporters"; " protestors" and "activists"; "technology hosts"; and "producers" (Walker and Cass, 2007). The customer's role is central in order to reduce the intervention cost in the DSM systems that is defined as the cost of exploring heterogeneous and specific consumption patterns and compensating consumers for participating in demand response programmes (Helms, Loock and Bohnsack, 2016). ...
... Flexibility degree refers to the "ability of power systems to utilize their resources to manage net load variation and generation outage, over various time horizons", and net load is defined as load minus supply from intermittent resources, such as wind and solar (Boscán and Poudineh, 2016). Flexibility can be stimulated either from consumption's valuables or from generation's valuables by coupling them with timing service (Helms, Loock and Bohnsack, 2016). The decentralized generation is not just developing sources of renewable energy but also a way of local balancing. ...
Conference Paper
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Recent developments in technology have been considered a critical factor in fighting climate change and accelerating energy transition. These developments are changing the current centralized and fossil fuel-based energy system into a new system with integrated renewable energy resources. The developments also facilitate the emergence of new business models and allow entrepreneurs to propose new products and services. This paper aims to identify the existent energy business models based on a systematic literature review, focusing on two main areas: renewable energy and demand-side management. With that purpose, a framework is described including specific characteristics for energy business models. Based on this framework, 22 different energy business models are presented clustered in eight patterns. The study draws on an exhaustive picture of the emerging business models and provides insights for researchers and for early-stage companies to innovate through business model transformation.
... Eleven scenarios were designed taking into account different generation technologies, a different mix, and a different target of climate changes under a time frame of 50 years. Reference [9] captured the technology development in three different target years and performed a sustainability evaluation of the 3 years, and [10] analyzed the sensitivity of each indicator to the SE index. ...
... Please go to [28] for detailed reference information. Table 6 gives a summation of the indicators of three typical references [9,15,19] on the sustainability evaluation of the national energy system, power system, and micro-grid. ...
... As we can see in Tables 3-5, indicators in the first category can be obtained either by objective measurement, such as temperature, or by simple evaluation, such as job creation, while sub-indicators or methodologies are further needed for indicators in the second and the third categories. Table 6 gives the sub-indicators of the economic, social, environmental and technical, operation and reliability dimensions proposed in [9,15,19] for the sustainability evaluation of power system applications at different levels. As shown in Table 6, LOLP and ELOE are commonly used reliability indexes, and are the abbreviation of loss of load probability and the abbreviation of expected loss of energy, respectively. ...
Article
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An active distribution network (ADN) differs from a traditional distribution network in many aspects, one of which is the integration of a large amount of distributed generation (DG), especially intermittent photovoltaics (PVs). The integration of intermittent PVs has both pros and cons for the distribution system. As the platform on which new techniques work and the main body of a greener future energy system, the development of an ADN has to be sustainable, need-oriented, and environmentally friendly, and the traditional technical–economic evaluation method cannot meet the requirements and provide advice in the decision-making process. Based on the concept of sustainable development, we used an ADN with the integration of a large number of distributed PVs (DGPVs) as an example and established a multi-dimensional index system to evaluate the sustainable development level (SDI) of the ADN. The analysis was based on a platform we built with consideration of the investment feasibility of the DGPVs’ investors, state and industrial policies, and their interactions with the distribution system. We first compared the development of DGPVs and the SDI of the ADN as the carrier of DGPVs under different state policies, and second, we compared the SDIs of three city ADNs with different solar resources and demand levels, but under the same state policy. The analysis results showed that different integration levels of DGPVs can be set for a city/area ADN with different solar resources and demand to achieve a comparable SDI, and a comprehensive incentive mechanism could be adopted for the development of DGPVs. In this way, the benefits of different parties can be considered at the same time and finally, the coordination of the sustainable development of multi-parties can be achieved.
... The time dimension may be the most important dimension for flexibility and its usage. According to the results of a survey of industry players (managers and modelers) conducted by [12], with an accurate timing strategy, timing- based flexibility business models in the energy sector could increase their profits while reducing their downside risk. The timing of the market participant could differ for supply-side flexibility resources compared with demand-side flexibility resources. ...
... The time dimension is strongly connected to the risk dimension. According to the results of a survey conducted by [12], a power market participant's short-term planning contains a higher risk of inefficiency than their long-term planning. For example, many market participants conduct their trading agreements months ahead and sometimes one year ahead, and they trade the same resources to multiple markets. ...
Preprint
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The authors provide a comprehensive overview of flexibility characterization along the dimensions of time, spatiality, resource, and risk in power systems. These dimensions are discussed in relation to flexibility assets, products, and services, as well as new and existing flexibility market designs. The authors argue that flexibility should be evaluated based on the dimensions under discussion. Flexibility products and services can increase the efficiency of power systems and markets if flexibility assets and related services are taken into consideration and used along the time, geography, technology, and risk dimensions. Although it is possible to evaluate flexibility in existing market designs, a local flexibility market may be needed to exploit the value of the flexibility, depending on the dimensions of the flexibility products and services. To locate flexibility in power grids and prevent incorrect valuations, the authors also discuss TSO-DSO coordination along the four dimensions, and they present interrelations between flexibility dimensions, products, services, and related market designs for productive usage of flexible electricity.
... Market timing-based planning in power systems such as multi-timing scheduling of the markets creates value in different ways, such as the alleviation of price and quantify risks for market participants and utilizing flexibility (Helms et al. 2016). ...
... To consider the ramp flexibility, it is common to add some constraints by taking the scheduling periods into account. The majority of papers which deal with the flexiramp procurement have applied the OR models Hobbs 2014, 2016;Bertsch et al. 2016;Moiseeva et al. 2015;Soares et al. 2016;Navid and Rosenwald 2012;Wu et al. 2013;Morales-España et al. 2014;Helms et al. 2016;Mikkola and Lund 2016;Tohidi et al. 2017). In addition to the classic linear, mixed integer linear programming, and mixed-integer nonlinear programming, more complex models such as bi-level and tri-level programming, stochastic programming, and robust programming have been applied Hobbs 2014, 2016;Ottesen et al. 2016;Cardell and Anderson 2015;Wu et al. 2015;Lamadrid and Mount 2012;Moarefdoost et al. 2016;Pozo et al. 2017;Kaheh et al. 2019a, b). ...
Article
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In recent years, the share of renewable energy sources (RES) in electricity generation portfolio has been growing, primarily supported by local and international energy policies to reduce the carbon footprint of the electricity sector. However, the large-scale integration of variable and uncertain RES has adverse effects on the power system operations. Therefore, the power system operators should apply advanced scheduling models and enhance the flexibility of the systems to compensate for the variability and uncertainty of RES. To deal with these challenges and covering the ramp scarcities and severe contingencies, not only more operational reserves are required but also the urgent actions is needed to develop the efficient markets, contracts, incentive mechanisms, effective scheduling models, and managerial approaches for encouraging suppliers to participate in flexibility procurement. This paper provides a background of the problem and a comprehensive review of the literature about flexible ramping markets and its procurement mechanisms.
... A LEM is also considered in [8] where a decentralized clearing method is proposed. Besides, an aggregator may trade flexibility services to a distribution system operator [9]. This concept is explored, in the framework of LEM, in [10]. ...
... D lem t,s = i∈N d lem i,t,s ; ∀t ∈ T , ∀s ∈ S; (9) pv lem i,t,s + pv dam i,t,s ≤ pv forec i,t,s ; ∀i ∈ N , ∀t ∈ T , ∀s ∈ S; (10) ...
... Another trend we observed is a development towards "assetlight" business models, which includes platforms, service-oriented, and shared-investment business models. In our study, 8 of the 19 filtered business models and 3 of the 6 selected business models are asset light in the sense of low capital intensity for the provider (Hamwi and Lizarralde, 2017;Helms et al., 2016). 8 Digitization especially promotes asset-light business models by linking distributed technologies, demanders, and suppliers via digital technologies. ...
... Which will be the leading technology mix of future energy systems is largely uncertain (Lovio et al., 2011), resulting in the expectation that new business models will incur high risk. We find a less prominent influence of risks on costs, which might be related to the general trend toward service-orientated or shared-investment business models (Hamwi and Lizarralde, 2017;Helms et al., 2016), with lower irreversible costs than asset-heavy business models. So on the one hand, the risk on costs might be lower thanks to the business models' agility and flexibility due to less fixed capital. ...
Article
The energy sector has long stood out for both its important role in economic prosperity and its major environmental impact. Recently, three key developments have affected the energy sector in many countries, namely the clean energy transition, market liberalization, and digitization. These developments enabled new business models in a coevolving regulatory landscape. While previous research showed that support policies played an important role in enabling sustainable new business models, little attention has been paid on the question how dependent these business models are on specific regulations, and hence to which extent are they at risk of becoming obsolete after a regulation changes. Here we address this gap by studying how new sustainable business models in the energy sector work, and by investigating their risk profile, especially concerning the risk of regulatory changes. An extended case study analysis for the case of Germany, including interviews with 34 experts from 24 companies, examines 6 new business models in detail and estimates the probability and impact of 108 individual risk events. Results show that regulatory risks mainly concern revenues (as compared to costs) via two channels: directly in cases where regulations set prices, such as for feed-in tariffs or tax exemptions; and indirectly in cases where regulations define who is allowed to compete. Finally we discuss policy implications, also taking into account that many new business models are service-oriented and as such “asset light”.
... Changes in price and fluctuation levels can shift the relative economic competitiveness of flexibility options. These shifts are caused by the specific ways in which flexible consumers, flexible suppliers, and storage system operators are affected by changes in pricing patterns (Helms et al. 2016). Flexible consumers can reduce expenses for power by shifting flexible loads to low-price hours. ...
... The unit commitment optimization model introduced here helps to assess the effects of these developments on the economics of flexibility options. Both the general tendency toward lower prices and the reduced price spreads in the course of an average day will force changes in the business model of storage systems in particular, and of flexibility options in general (Helms et al. 2016). Naturally, these trends could reverse in the future, and peak and off-peak spreads could increase again, as have in fact predicted for the mid-2020s due to the continued expansion of wind power. ...
Article
The expansion of intermittent renewable power poses new challenges: Balancing fluctuations in power supply and demand requires additional flexibility. In this work, we model a unit commitment optimization problem to investigate the economic feasibility of concepts for flexible power generation from biogas. Because the economics of flexible power generation also depend on the availability of other flexibility options, we compared flexible biogas plants in power markets with different characteristics, namely Germany, northern Italy, and the islands of Sardinia and Sicily. Using an algorithm to optimize the constrained mixed-integer unit commitment of biogas plants, we determine hourly optimal production schedules in each region based on the prices from 2008 to 2017. The algorithm helps to assess whether the investment for equipment that is required for flexible electricity production, such as a larger generator and storage facilities, would have been justified by the likely additional revenue in the investigated period. Our results show that the premium that flexible biogas plants can earn over non-flexible ones has decreased significantly between 2008 and 2017 in all investigated regions. Since 2015, additional incentives have been indispensable in all four investigated regions to make the concept of producing power from biogas flexibly economically viable.
... A potential sustainable outcome of this tension would harness synergy and creativity potential by employing new BMs that enable consumers to holistically optimize their behavior considering the energy system at the meso level (Hodson & Marvin, 2010;Sulkowski et al., 2018). For example, energy suppliers can incentivize optimal consumer behavior through BMs with flexible pricing (Helms et al., 2016). ...
Article
This article presents an in-depth case study on cross-sectoral collaborative business model development (CBMD) that is pressured to produce systemic sustainability transformations. Drawing on paradox theory, we identify three paradoxical tensions—value, creativity, and consumer tensions. While engaging these tensions offers synergy and creativity potential, engagement barriers limit stakeholders’ ability to harness this potential. Stakeholder networks can access synergy potential by engaging meso-level tensions through increased trust and collaboration. Yet, macro-level engagement barriers posed by governments and society lead to a reliance on incumbent patterns and reduce creativity. This research advocates for reconsidering CBMD processes and regulatory frameworks to enable engagement with these paradoxical tensions. Our implications offer insights for industries transitioning from centralized models to more individualized, decentralized approaches. The findings underscore the necessity of promoting reciprocal interactions and engagement across different levels and the early integration and strategic orchestration of stakeholders to cultivate trust and align objectives.
... . Transaction (CAPEX): includes the costs of collecting information regarding products and customers, managing contracts and procedures for external transactions[34]. ...
Thesis
Full-text available
Europe is at the beginning of an energy revolution. The old energy paradigm where big, centralized power plants provide energy to passive consumers is ending. Distributed renewable energy resources and electrification of mobility, industrial processes or building heating and cooling devices are changing the way in which electricity is produced and consumed. In addition, the current socio-political tensions and the Ukrainian war boosts European countries to reach the energy independency from other regions and from fossil fuels. In this moment, energy is more expensive than ever, and citizens are every time more conscious about environmental issues and desire to be an active part of the revolution. In this context, advances in the Information Technology (IT) allows to gather much more information from devices and allow to control them remotely, although their potential in energy-related topics is still untapped. At the same time, European Directives are incentivizing consumers to play an active role in the electricity system and national regulators are transposing the European Directives to enable consumers to actively participate in electricity markets. However, it is not easy for the System Operator to handle the coexistence of consumers and generators in the same markets’ mechanisms, due to their intrinsic differences. Demand aggregators are the new market actors that promise to put the consumers at the center of the energy system. Demand aggregator’s role is to aggregate, trade, and coordinately manage the flexibility of multiple consumers in electricity markets. Demand-side flexibility is the ability of a consumer to modify its consumption depending on external factors, such as electricity prices or electricity’s grid conditions. However, it is not clear what is the best strategy to adopt for Demand Aggregators. Under this new paradigm, this PhD thesis prospects the optimal strategies of a demand aggregator that manages the flexibility of different types of assets in energy and balancing markets, from the optimal bidding strategies in a day-ahead horizon to the execution and control of the devices in real time. To achieve this main objective, the thesis firstly analyzes the regulation of the four main European balancing markets, with special attention in finding barriers and enablers for a commercial scale development of Demand Aggregators. Once analyzed the framework, the thesis aims to cover the optimal operation of the Demand Aggregator: (1) the thesis explores and proposes three different algorithms to predict the electricity’s consumption of different type of consumers, proposing a methodology to compare them; (2) the work proposes a methodology to predict the flexibility of several type of consumption and allow to trade this flexibility in electricity and balancing markets and (3) the thesis proposes two novel mathematical programming models to allow the participation in the Iberian secondary reserve market and the joint participation in short-term energy and tertiary reserve markets. Results demonstrate the technical and economic viability for Demand Aggregators to participate in the selected markets and the novelty of the proposed methodologies. Further research topics are individuated due to the complexity of the problem, including electricity market’s regulatory issues or economical and physicals restrictions to consider when a change in the consumer’s behavior is needed. Despite the challenging framework, from the algorithms and knowledge developed during this thesis, the author, with its thesis director, funded in 2020 Bamboo Energy. Bamboo Energy is a company created to commercialize the software developed withing this thesis, making demand aggregation a reality in Spain. Consequently, this thesis presents a success story of how what began, more than five years ago, with the initial steps of energy flexibility in a research environment, ended up with a spin-off that tackles real market business on energy management in demand aggregation applications. Keywords: Demand aggregators; flexibility; energy markets; Demand Response; balancing services; bidding strategies; optimization; forecast, business models.
... The cost could be concentrated on one actor (the DA) in case of centralized control or distributed among different EMSs otherwise. 3. Transaction (CAPEX): Includes the costs of collecting information regarding products and customers, managing contracts, and procedures for external transactions [33]. 4. Activations (OPEX): Defined as the cost to activate flexibility in the site. ...
... In light of the decentralization dynamics of energy systems, business models related to the diffusion of solar PV and battery storage [29], their integration in the energy system [58], and the local management of these technologies in the form of prosumer communities [30] or energy hubs [59] have been in focus. Within this field, digitally enabled business models revolving around decentralized flexibility provision have enjoyed particular attention in business model research [27,[60][61][62][63]. For example, the electrification of transport has led to newly emerging business models for electric mobility and smart charging [31,64,65]. ...
... In the smart service context, customers are able to choose the proportion of energy that is coming from renewable sources, as well as to make informed decisions regarding shifting energy use to off-peak times (Helms et al., 2016). Since residential customers have various options, service companies need to identify which smart energy services best meet preferences and needs of their customer base (Fuentes et al., 2019). ...
Article
Smart grids enable large-scale integration of low-carbon energy sources and energy efficiency. However, changing customer energy consumption behavior has been a challenge, requiring the development of services that change the way customers relate with energy to increase energy efficiency and savings in households. To this end, this qualitative study in the Portuguese energy market offers a nuanced understanding of how customer cocreate value with smart energy services, identifying three different customer value cocreation practice styles and respective engagement behaviors). Study findings reveal that while AHEM (Advanced Home Energy Management) and MEM (Mobility Energy Management) customers are willing to play autonomous roles in managing the energy consumption and production, HFEC (Hassle Free Home Energy Consumption) customers may be open to adopt smart energy services without spending time and effort in using these services. The study offers relevant implications for policy makers and ESCOs (energy service companies). Although much attention has been paid to advanced customers, a nuanced approach may enable ESCOs to reach disengaged customers, by offering tailored services that are suited to their hassle free value cocreation practice styles. Policy makers may also explore tailored, and service focused incentives to push the adoption of smart service solutions in large-scale.
... Flexibility adapts electricity demand or supply to the variability resulting from low-carbon sources (IEA, 2011). Flexibility reduces peaks by adding or reducing the volume of electricity in specific locations or by timing supply and demand (see Helms et al., 2016;Kubli et al., 2018;Reuter et al., 2019). For flexibility consumers like electricity grid operators, the platform provides a digital service for procuring flexibility (see also Xu et al., 2018). ...
Article
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With the primary emphasis on the tensions that platform organizations face between both for‐profit and environmental value‐creation goals, we know very little about the managerial drivers and mechanisms through which they realize multiple goals. Based on a qualitative, inductive case study of a UK‐based digital platform's business model, we uncover the role of business model design. We find that the emphasis managers put on either the redistribution or the accessibility design theme shapes the environmental and financial value‐creation, respectively and that a hybrid business model (i.e., realizing both for‐profit and for‐purpose value‐creation) hinges on their integration. Two managerial drivers—strategic synergies and dynamic coupling—enable platform organizations to increase integration. We contribute to the literatures on hybrid business models, paradox, and business models for sustainability, suggesting that digital platforms not only create, but can actively manage the environmental paradox by integrating multiple design themes within hybrid business models.
... Hannon, Foxon, and Gale (2013) analyzed the role of energy service companies in the UK and found that technological and institutional change could provide a more favorable environment for energy service companies to contribute to a low-carbon energy system. Helms, Loock, and Bohnsack (2016) studied timing-based business models, focusing on Switzerland, to understand the possibilities for flexibility creation, considering the growing shares of intermittent solar and wind generation. Hall and Roelich (2016) identified business model archetypes for UK local electricity supply, elaborating on value creation and capture, while identifying market barriers. ...
Article
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Delivering a low-carbon future depends significantly on the decarbonization of the electricity industry. Increasingly, electric utilities have experienced pressure to redefine their business model amid the need to transition to a sustainable energy system. In this study, we focus on how utilities have changed their business model to adapt to the emergence of sustainable energy innovations in the energy system and which value creation drivers they draw on. By framing the business model as an activity system, we capture how utilities expand the boundaries of their business to integrate sustainable energy activities. We analyze 756 boundary-spanning transactions (mergers and acquisitions, joint ventures, and strategic alliances) of 20 European utilities from 1990 to 2019. We find that utilities pursued 20 distinct sustainable energy activities across renewable electricity generation, smart electricity management, emerging technologies, and sustainable mobility. Preference for renewable energy activities, particularly wind generation is observed. The combination of renewable electricity generation and smart electricity management indicates a focus on systems integration. We also find preference for integrating activities through mergers and acquisitions. Utilities focus on acquiring sustainable energy activities leading to a novel bundling of activities contributing to decarbonization while reinforcing the efficiency and lock-in of their traditional business model.
... Authors in [16] investigated time aspects of flexibility provision through a qualitative survey-based study of different companies. They found that timing-based business models could perform in very short time intervals to complement traditional power generation capabilities when managing changes in generation or consumption plans. ...
Article
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The authors focus on a model for system operators that uses centralized scheduling of multiple flexibility assets and services to minimize the cost of managing problems with grid congestion, voltages, and losses. The model schedules flexibility assets using stochastic optimization for AC optimal power flow in an active distribution network. The novelty of the contribution lies in its focus on how the dynamic capabilities of the flexibility resources are defined with regard to how uncertainty is resolved in the model. The impact of uncertainty is studied by using well-known quality measures from stochastic programming, such as the value of the stochastic solution. Moreover, the authors introduce a new measure related to the impact of representing uncertainty and flexibility when considering reactive power. By changing the time attributes of flexibility assets, the authors show the impact of uncertainty and time structure on a scheduling problem. The uncertainties considered are price and load levels. The findings reveal that the quality of the scheduling of each flexibility resource depends on using a stochastic model with a rigorous consideration of time and uncertainty.
... The changes utilities make to survive in low-carbon transitions can also change the consumer energy contract 15 . New consumer contracts are emerging that integrate decentralized renewables 9,16 , move to energy-as-a-service as opposed to pay-per-kilowatt tariffs 17,18 , and reward consumer behaviour change [19][20][21] . The energy transition in liberalized markets is shaped by these trends 22 . ...
Article
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Energy as a service, smart home opportunities and electrification of heat and transport can lead to new ways of switching supplier or choosing new energy contracts. Here, we used business model collaboration workshops to create archetypes of new utility business models, which were then tested with a representative sample of British energy consumers to explore their attractiveness to different segments of society. We show that some of these segments have a substantial appetite for new business models. However, the segments that choose these models are more likely to be affluent, educated homeowners. Without intervention, innovation in utility business models risks exacerbating existing social inequalities, as lower incomes, lower home ownership and low education result in lower preferences for, or no ability to engage with, new utility business models. We also find that institutional trust beyond the energy sector is a key driver of consumer segmentation.
... In particular, for RESs and flexible energy systems to be profitable, it is necessary to ensure several value streams such as optimization of own consumption, short-term market participation, or balancing service provision [31]. Hence, analyzing and developing new incentives for RESs and flexible systems has been widely researched [32][33][34]. An important result to these studies is that, although aggregators are often seen as key enablers [35], they face numerous country-specific barriers [36]. ...
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... Today, energy utilities see themselves confronted with fundamental changes arising from new technologies, changing policy requirements and higher customer expectations (Baines et al., 2009;Abdelkafi et al. 2013, Helms et al., 2016. They are forced to explore new solutions (i.e., energy efficiency measures, demand response solutions, smart metering and so on), new ways of power generation (i.e., renewable energy sources), and new (decentralized) models of production, as well as to develop new electricity uses. ...
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... These so-called "prosumers" for instance produce electricity using solar panels or store electricity in electric vehicle batteries. To orchestrate this on a larger scale to effectively exploit the combined flexibility of the users, an aggregator can be the agent (Helms et al. 2016). An aggregator is a demand side service provider, usually in a utility market such as the electricity market. ...
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... However, the current challenges provide new opportunities for utilities and energy services companies (ESCOs). Smart meters encourage the development of some new busi-ness models [2]. These business models are as follows: i) the vast amount of collected data encourages the use of machine learning in understanding load behaviors and anticipating some actions for retail companies, utilities, and ESCOs, and ii) the growth of ICT platforms and the Internet of Things are a technological revolution in power systems, allowing the integration of decentralized sources. ...
... As part of a VPP, intermittent power sources can pass the prequalification that is required for participating in market auctions as well as avoid punishing costs for balancing power in case of faulty production forecasts. In addition to enabling the market participation of intermittent power sources, the aim of a VPP is to apply the available flexibilities to different markets to maximize profit of their operation (Helms et al., 2016). In the following two sub-sections, both different kinds of flexibility options and the potential markets are introduced. ...
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... Value capture, in turn, refers to a firm's profit formula, that is, the organization of its revenue and cost streams. To accommodate increasing shares of renewable energy, novel business models emerge that are creating value by providing flexibility to the electric grid [17]. ...
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... For instance, Loock (2012) studied the business model preferences of 249 renewable energy investment managers, and found that service-oriented business models are more favored by investment managers. Other studies focused on linking business models with integration of renewable energy technologies (Flodén and Williamsson, 2016;Helms et al., 2016;Nair and Paulose, 2014;Scott, 2017). Research on business model of deploying renewable energy was also conducted to examine their drivers, barriers, and potentials (Engelken et al., 2016;Horváth and Szabó, 2018). ...
... Flexibility is the primary value, thus requiring coordinated activities among the ecosystem actors. Here, the context-related value is refined to fit specific use cases, such as flexibility forecast and network load feedback (Helms, Loock, & Bohnsack, 2016). The main offerings in this layer are usually the efficiency and flexibility services. ...
... Typically, literature (e.g., (Aslani & Mohaghar, 2013;Boehnke, 2007;Frantzis, Graham, Katofsky, & Sawyer, 2008;Gordijn & Akkermans, 2007;Hall & Roelich, 2016;He, Delarue, D'haeseleer, & Glachant, 2011;Hellström, Tsvetkova, Gustafsson, & Wikström, 2015;Huijben & Verbong, 2013;Karakaya, Nuur, & Hidalgo, 2016;Koirala et al., 2016;Niesten & Alkemade, 2016;Richter, 2012;Ruggiero et al., 2015)) does not directly address increasing flexibility through business models but rather concentrates on distributed renewable generation. However, some timing-based business models providing flexibility in the power sector have been studied (Helms, Loock, & Bohnsack, 2016). More focused work on flexibility creation through different business cases is clearly needed. ...
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- This paper describes the process of inducting theory using case studies from specifying the research questions to reaching closure. Some features of the process, such as problem definition and construct validation, are similar to hypothesis-testing research. Others, such as within-case analysis and replication logic, are unique to the inductive, case-oriented process. Overall, the process described here is highly iterative and tightly linked to data. This research approach is especially appropriate in new topic areas. The resultant theory is often novel, testable, and empirically valid. Finally, framebreaking insights, the tests of good theory (e.g., parsimony, logical coherence), and convincing grounding in the evidence are the key criteria for evaluating this type of research.
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Understanding sources of sustained competitive advantage has become a major area of research in strategic management. Building on the assumptions that strategic resources are heterogeneously distributed across firms and that these differences are stable over time, this article examines the link between firm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate sustained competitive advantage-value, rareness, imitability, and substitutability are discussed. The model is applied by analyzing the potential of several firm resources for generating sustained competitive advantages. The article concludes by examining implications of this firm resource model of sustained competitive advantage for other business disciplines.
Article
The electric power sector stands at the beginning of a fundamental transformation process towards a more sustainable production based on renewable energies. Consequently, electric utilities as incumbent actors face a massive challenge to find new ways of creating, delivering, and capturing value from renewable energy technologies. This study investigates utilities' business models for renewable energies by analyzing two generic business models based on a series of in-depth interviews with German utility managers. It is found that utilities have developed viable business models for large-scale utility-side renewable energy generation. At the same time, utilities lack adequate business models to commercialize small-scale customer-side renewable energy technologies. By combining the business model concept with innovation and organization theory practical recommendations for utility mangers and policy makers are derived.
Article
Increasing penetrations of intermittent renewable energy resources will require additional power system services. California recently adopted an energy storage mandate to support its renewable portfolio standard, which requires 33% of delivered energy from renewables by 2020. The objective of this paper is to estimate the amount of energy storage that could be provided by residential thermostatically controlled loads, such as refrigerators and air conditioners, and the amount of revenue that could be earned by loads participating in ancillary services markets. We model load aggregations as virtual energy storage, and use simple dynamical system models and publicly available data to generate our resource and revenue estimates. We find that the resource potential is large: 10-40 GW/8-12 GWh, which is significantly more than that required by the mandate. We also find that regulation and spinning/non-spinning reserve revenues vary significantly depending upon type of load and, for heat pumps and air conditioners, climate zone. For example, mean regulation revenues for refrigerators are $11/year, for electric water heaters are $24/year, for air conditioners are $0-32/year, and for heat pumps are $22-56/year. Both consumer choices, such as appliance settings, and policy, such as the design of ancillary service compensation and appliance standards, could increase revenue potentials.
Article
Nations today are urgently challenged with achieving a significant increase in the deployment of renewable energies. In Europe that need has given rise to a debate about the most effective and efficient support strategy. Whilst the different interests debate whether full European harmonisation or strengthening of national support policies for electricity from renewable energy sources (RES-E) is the best way forward, individual national support schemes are rapidly evolving. This study investigates how the EU member states have applied support policy types over the last decade. By identifying predominant developments in the application of feed-in tariffs, premiums, tradeable green certificates, tax incentives, investment grants, and financing support for specific technologies (wind, biomass, PV), this study shows that Europe is currently experiencing certain tendencies towards a ‘bottom-up’ convergence of how national policy-makers design RES-E policy supports. While some outliers remain, the policy supports of most countries become more similar in the policy types applied (dominance of feed-in tariffs) and in their scope of implementation (differentiation for installation sizes and ‘stacking’ of multiple instruments). These trends in national decision-making, which show tendencies of convergence, could make an EU-driven ‘top-down’ harmonisation of support either dispensable or at least (depending on the agreement) less controversial. // This article is also published as part of my PhD thesis, available here: http://orbit.dtu.dk/en/publications/risk-implications-of-energy-policy-instruments(8d770b85-a75c-45c3-9a2e-e5740b0b907e).html
Article
As electricity systems incorporate increasing levels of variable renewable generation, conventional plant will be required to operate more flexibly, with potential impacts for economic viability and reliability. Northern Ireland is pursuing an ambitious target of 40% of electricity to be supplied from renewable sources by 2020. The dominant source of this energy is anticipated to come from inherently variable wind power, one of the most mature renewable technologies. Conventional thermal generators will have a significant role to play in maintaining security of supply. However, running conventional generation more flexibly in order to cater for a wind led regime can reduce its efficiency, as well as shortening its lifespan and increasing O&M costs. This paper examines the impacts of variable operation on existing fossil fuel based generators, with a particular focus on Northern Ireland. Access to plant operators and industry experts has provided insight not currently evident in the energy literature. Characteristics of plant operation and the market framework are identified that present significant challenges in moving to the proposed levels of wind penetration. Opportunities for increasing flexible operation are proposed and future research needs identified.
Article
This paper explores the geographical and policy context for an emergent business model from Better Place to deliver battery electric car mobility in Denmark. It argues that the combination of radically different technologies and a highly complex multi-agency operating environment theoretically provide the conditions and requirements for such an emergent business model. While focused on battery electric cars, renewable energy generation and smart grids, the paper has wider applicability to an understanding of the interplay between place, innovation and sustainability which suggests that diverse solutions are likely to be the characteristic solution rather than ubiquity and standardization. The paper argues, however, that the innovative business model, the deployment of electric vehicles, and the use of renewable energy systems, in this case largely based on wind power, while mutually supportive and contributing to wider policy aims with respect to the reduction of carbon emissions, may still fail in the face of entrenched practices. At the theoretical level it is concluded that theorization of business models needs a broader perspective beyond the typical ‘value creation, value capture’ rubric to better understand the wider role such models have in meeting societal goals, and to understand the structural impediments to organizational and technical innovation.
Article
Photovoltaic (PV) cells, onshore wind turbines, internet technologies, and storage technologies have the potential to fundamentally change electricity markets in the years ahead. Photovoltaic cells are the most disruptive energy technology as they allow consumers of all sizes to produce power by themselves—new actors in the power market can begin operating with a new bottom-up control logic. Unsubsidised PV markets may start to take off in 2013, fuelling substantial growth where PV power is getting cheaper than grid or diesel backup electricity for commercial consumers. Managing loads and achieving a good match between power consumption and weather-dependent power production will likely become a key issue. This consumption—production balance may trigger massive innovation and investment in energy management technologies involving different kinds of storage and controls. Increasing autonomy and flexibility of consumers challenges the top-down control logic of traditional power supply and pushes for a more decentralised and multi-layered system. How rapidly and smoothly this transformation occurs depends to a large extent on the adaptation speed of the regulatory framework and on the ability of market players to develop appropriate business models. The paper discusses conflicts of interest; hurdles and drivers; opportunities; and traps for this perspective.
Article
The digitalization of the electricity grid opens the way to bundle value added services to the electricity commodity, and possibly shift business value to electricity services in line with the notions of efficiency, conservation and sustainability. In this context, market forces should be mobilized within the boundaries of energy policy goals to contribute to the massive investments that are required to fulfill the Smart Grid vision. In this paper, we present a systemic perspective aimed at establishing technical and economic synergies that may improve the business cases of individual different Smart Grid technologies and contribute to reverse the consumption-driven paradigm of the electricity sector. Our analysis is supported by evidence from applications in the electric vehicle and smart meter ecosystems. Throughout the paper, an EU (European Union) perspective is primarily considered.
Article
This paper explores the role of the business model in capturing value from early stage technology. A successful business model creates a heuristic logic that connects technical potential with the realization of economic value. The business model unlocks latent value from a technology, but its logic constrains the subsequent search for new, alternative models for other technologies later on-an implicit cognitive dimension overlooked in most discourse on the topic. We explore the intellectual roots of the concept, offer a working definition and show how the Xerox Corporation arose by employing an effective business model to commercialize a technology rejected by other leading companies of the day. We then show the long shadow that this model cast upon Xerox's later management of selected spin-off companies from Xerox PARC. Xerox evaluated the technical potential of these spin-offs through its own business model, while those spin-offs that became successful did so through evolving business models that came to differ substantially from that of Xerox. The search and learning for an effective business model in failed ventures, by contrast, were quite limited.
Article
The investigation is an attempt to apply a set of consistent and official definitions of energy services (ES), energy efficiency services (EES) and energy performance contracting (EPC) on a well-developed market: France. After defining the historical context of the French market the authors describe the types of offers that are presently made and that fall within the definition of energy services. There are many classic and novel factors for the success of energy services. For instance, the energy services market is now partly structured by the CEE scheme, the French ‘white certificates’ or ‘energy certificates scheme’. Also the grid problems lead to new services. The companies active on the market are described as a result of an empirical survey of ES market in France. This empirical survey of ES market in France includes estimates of the number of companies and of their turnover both for ES and EES. Examples and case studies are developed as a background.
Article
We examine the changes to the electric power system required to incorporate high penetration of variable wind and solar electricity generation in a transmission constrained grid. Simulations were performed in the Texas, US (ERCOT) grid where different mixes of wind, solar photovoltaic and concentrating solar power meet up to 80% of the electric demand. The primary constraints on incorporation of these sources at large scale are the limited time coincidence of the resource with normal electricity demand, combined with the limited flexibility of thermal generators to reduce output. An additional constraint in the ERCOT system is the current inability to exchange power with neighboring grids. By themselves, these constraints would result in unusable renewable generation and increased costs. But a highly flexible system - with must-run baseload generators virtually eliminated - allows for penetrations of up to about 50% variable generation with curtailment rates of less than 10%. For penetration levels up to 80% of the system's electricity demand, keeping curtailments to less than 10% requires a combination of load shifting and storage equal to about one day of average demand.
Article
This paper describes the process of inducting theory using case studies-from specifying the research questions to reaching closure. Some features of the process, such as problem definition and construct validation, are similar to hypothesis-testing research. Others, such as within-case analysis and replication logic, are unique to the inductive, case-oriented process. Overall, the process described here is highly iterative and tightly linked to data. This research approach is especially appropriate in new topic areas. The resultant theory is often novel, testable, and empirically valid. Finally, framebreaking insights, the tests of good theory (e.g., parsimony, logical coherence), and convincing grounding in the evidence are the key criteria for evaluating this type of research.
Article
Enron’s senior management has become the byword for all that is bad with corporate America. Yet there has been hardly any in-depth analysis of what contributed to the strategic mistakes that resulted in the company’s downfall. This paper is not about the cover-ups but an analysis of the antecedents of these strategic mistakes. The paper demonstrates that the core successes of Enron were rooted in its ability to manage risks in complex transactions. Yet these very risks that ultimately brought Enron down. In short, this article is about what we can learn about managing risks in the increasingly complex business environment.“Make the non-recurring recurring.”“We are a cool company.” Jeff Skilling, Enron CEO.
Article
Renewable energy is becoming increasingly important for economies in many countries. But still in an emerging industry, renewable energy requires supportive energy policy helping firms to develop and protect competitive advantages in global competition. As a guideline for designing such policy, we consult well-informed stakeholders within the renewable energy industry: investors. Their preferences serve as explorative indicator for assessing which business models might succeed in competition. To contribute to only limited research on renewable energy investors’ preferences, we ask, which business models investment managers for renewable energy prefer to invest in. We report from an explorative study of 380 choices of renewable energy investment managers. Based on the stated preferences, we modelled three generic business models to calculate the share of investors’ preferences. We find exiting evidence: a “customer intimacy” business model that proposes best services is much more preferred by investors than business models that propose lowest price or best technology. Policy-makers can use those insights for designing policy that supports service-driven business models for renewable energy with a scope on customer needs rather than technology or price. Additionally, we state important implications for renewable energy entrepreneurs, managers and research.
Article
Peter Asmus is a Senior Analyst with Pike Research (www.pikeresearch.com), a leading authority on Smart Grid topics. He is also president of Pathfinder Communications, whose clients have included the Center for Energy Efficiency & Renewable Technologies, California Energy Commission, Governor's Wind Energy Coalition, and the Energy Foundation. His books include Introduction to Energy in California (University of California Press, 2009), Reaping the Wind (Island Press, 2001), Reinventing Electric Utilities (1997) and In Search of Environmental Excellence (1990).
Article
Whenever a business enterprise is established, it either explicitly or implicitly employs a particular business model that describes the design or architecture of the value creation, delivery, and capture mechanisms it employs. The essence of a business model is in defining the manner by which the enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit. It thus reflects management's hypothesis about what customers want, how they want it, and how the enterprise can organize to best meet those needs, get paid for doing so, and make a profit. The purpose of this article is to understand the significance of business models and explore their connections with business strategy, innovation management, and economic theory.
Article
Now that the risks of climate change have been confirmed and the European States have declared their willingness to pursue ambitious objectives for producing electricity from renewable energy sources, it becomes crucial to take a look at the relative efficiency of the different incentive schemes used. Such schemes may focus on quantities—defining national targets and setting up bidding systems, or quota systems providing for green certificate trading—, or they may focus on prices—feed-in tariffs. Clearly, these instruments are much the same as those used in environmental policies, with similar discussion involved in their choice. Whatever the system chosen, the role of the public authorities is quite specific: to stimulate technical progress and speed up the technological learning processes so that ultimately renewable energy technologies will be able to compete with conventional technologies, once the environmental costs have been internalised. A comparison of instruments must thus take into account the characteristics of the innovation process and adoption conditions—uncertainties regarding cost curves, learning effects—which means also looking at dynamic efficiency criteria. The authors examine the efficiency of the different incentive schemes for the development of renewable energy sources, both from a theoretical point of view by comparing price-based approaches with quantity-based approaches, and from a practical point of view by looking at concrete examples of how these different instruments have been implemented. The paper concludes that a system of feed-in tariffs is more efficient than a bidding system, but highlights the theoretical interest of green certificate trading which must be confirmed through practice, given the influence of market structures and rules on the performance of this type of approach.
Article
This paper attempts to explain why innovating firms often fail to obtain significant economic returns from an innovation, while customers, imitators and other industry participants benefit Business strategy — particularly as it relates to the firm's decision to integrate and collaborate — is shown to be an important factor. The paper demonstrates that when imitation is easy, markets don't work well, and the profits from innovation may accrue to the owners of certain complementary assets, rather than to the developers of the intellectual property. This speaks to the need, in certain cases, for the innovating firm to establish a prior position in these complementary assets. The paper also indicates that innovators with new products and processes which provide value to consumers may sometimes be so ill positioned in the market that they necessarily will fail. The analysis provides a theoretical foundation for the proposition that manufacturing often matters, particularly to innovating nations. Innovating firms without the requisite manufacturing and related capacities may die, even though they are the best at innovation. Implications for trade policy and domestic economic policy are examined.
Article
The German feed-in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies. Critics state that the costs for consumers are too high. An important aspect to be considered in the discussion is the price effect created by renewable electricity generation. This paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in Germany. The central aspect to be analysed is the impact of renewable electricity generation on spot market prices. The results generated by an agent-based simulation platform indicate that the financial volume of the price reduction is considerable. In the short run, this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits. In the case of the year 2006, the volume of the merit-order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers.
Article
Understanding sources of sustained competitive advantage has become a major area of research in strategic management. Building on the assumptions that strategic resources are heterogeneously distributed across firms and that these differences are stable overtime this article examines the link between firm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate sustained competitive advantage—value, rareness, imitability, and substitutability—are discussed. The model is applied by analyzing the potential of several firm resources for generating sustained competitive advantages. The article concludes by examining implications of this firm resource model of sustained competitive advantage for other business disciplines.ABSTRACT FROM AUTHOR
Article
We explore the theoretical foundations of value creation in e-business by examining how 59 American and European e-businesses that have recently become publicly traded corporations create value. We observe that in e-business new value can be created by the ways in which transactions are enabled. Grounded in the rich data obtained from case study analyses and in the received theory in entrepreneurship and strategic management, we develop a model of the sources of value creation. The model suggests that the value creation potential of e-businesses hinges on four interdependent dimensions, namely: efficiency, complementarities, lock-in, and novelty. Our findings suggest that no single entrepreneurship or strategic management theory can fully explain the value creation potential of e-business. Rather, an integration of the received theoretical perspectives on value creation is needed. To enable such an integration, we offer the business model construct as a unit of analysis for future research on value creation in e-business. A business model depicts the design of transaction content, structure, and governance so as to create value through the exploitation of business opportunities. We propose that a firm's business model is an important locus of innovation and a crucial source of value creation for the firm and its suppliers, partners and customers.
Article
This paper explores the role of the business model in capturing value from early stage technology. A successful business model creates a heuristic logic that connects technical potential with the realization of economic value. The business model unlocks latent value from a technology, but its logic constrains the subsequent search for new, alternative models for other technologies later on--an implicit cognitive dimension overlooked in most discourse on the topic. We explore the intellectual roots of the concept, offer a working definition and show how the Xerox Corporation arose by employing an effective business model to commercialize a technology rejected by other leading companies of the day. We then show the long shadow that this model cast upon Xerox's later management of selected spin-off companies from Xerox PARC. Xerox evaluated the technical potential of these spin-offs through its own business model, while those spin-offs that became successful did so through evolving business models that came to differ substantially from that of Xerox. The search and learning for an effective business model in failed ventures, by contrast, were quite limited. Copyright 2002, Oxford University Press.
Article
Spot power prices are volatile and since electricity cannot be economically stored, familiar arbitrage-based methods are not applicable for pricing power derivative contracts. This paper presents an equilibrium model implying that the forward power price is a downward biased predictor of the future spot price if expected power demand is low and demand risk is moderate. However, the equilibrium forward premium increases when either expected demand or demand variance is high, because of positive skewness in the spot power price distribution. Preliminary empirical evidence indicates that the premium in forward power prices is greatest during the summer months. Copyright The American Finance Association 2002.
Article
Developed countries increasingly rely on gas storage for security of supply. Widespread deregulation has created markets that help assign an objective value to existing and new to build storages. Storage valuation is nevertheless a challenging task if we consider both the financial and physical aspects of storage. In this paper we develop a Monte Carlo valuation method, which can incorporate realistic gas price dynamics and complex physical constraints. In specific we extend the Least Squares Monte Carlo method for American options to storage valuation. We include numerical results and show ways to improve computational speed.
Article
We analyze one of the most important phenomena of emerging B2B markets, their impact in promoting changes in contracting for the same goods traded on the B2B exchange. This trend is especially important in capital-intensive industries, where improvements in #ne-tuning the coordination of supply and demand carry large economic bene#ts. The spot market information conveyed through B2B transactions has become the basis in many of these markets for de#ning options, terms of trade and contracting terms for long-term contracts that are benchmarked on the shortrun B2B transactions. This paper notes a broad set of goods and services currently being traded in both B2B short-run markets and longer-term contract markets, and reviews the economic and managerial frameworks that have been proposed to explain the structure of these markets and interdependent contracts. We provide several examples to illustrate the theoretical underpinnings, which derive from contract theory, auction theory and options theory. We then provide a framework based on transactions cost economics, codi#ability in B2B exchanges and short-run and long-run competition to shed light on the nature of B2B exchanges in capital-intensive industries and their integration with contracting innovations that are being engendered by these exchanges.
Die Energiewende im Stromsektor: Stand der Dinge
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Flexible Generation: Backing up Renewables
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