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Timing-based business models for flexibility creation in the electric power sector
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.
... 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. ...
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.
... 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. ...
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.
... 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) ...
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.
... 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. ...
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.
... 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. ...
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.
... Third-party "local aggregator" BM links demand and local supply by providing the consumers with smart meters in order to influence consumer behavior and enable them to switch consumption patterns. The virtual net metering enables netting off the local supply from the utility's supply [34,35]. ...
... The main cost stems from the advanced technologies like smart sensors and apps while the revenue comes from the monthly fee service [36]. Several terms have identified in the academic review around this BM "Timing-based BMs" [35], "E-balance BM" [36], and "Balancing service platform" [37] "Peer to Peer" BM can also be used to allow consumer to choose a mix of distributed generation [34]. ...
One of the main interest of product-service system (PSS) is its potentiality to minimize the environmental impact of both consumption and production. In the energy sector, Product-Service System has been discussed in the literature as a concept associated with energy efficiency. However, the liberalization of the energy markets and the increasing market share of distributed renewable energy allow ventures and new actors to employ Product-Service System in both decentralized renewable energy generation and demand-side management. This paper is a review paper exploring different business models (BMs) for energy transition. It outlines three major business models: Customer-owned product centered BMs, where the customer owns the product related to the electricity generation or management; Third-party service centered BMs, where a third party offers energy services to the customer; and finally Energy community BMs, where resources are pooled and shared between community members.
... 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. ...
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”.
... 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) ...
... 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. ...
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). ...
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.
... The VPP can aggregate DERs based on their respective characteristics, achieve efficient use of various types of resources, and reduce the generation of abandoned wind power (WP) and photovoltaic (PV). The VPP has developed rapidly in recent years, such as Vattenfall and Next Kraftwerke in Germany [9]. In China, a VPP demonstration project has come into use in Yunnan Province [10]. ...
Virtual power plant (VPP) is an effective technology form to aggregate the distributed energy resources (DERs), which include distributed generation (DG), energy storage (ES) and demand response (DR). The establishment of a unified and coordinated control of VPP is an important means to achieve the interconnection of energy internet. Therefore, this paper focuses on the research of VPP construction model. Firstly, a preliminary introduction on all kinds of the DERs is carried out. According to the relevant guidelines, the decision area of the VPP is carefully divided, and the decision variables representing the various resources in the area are determined. Then, in order to get a VPP with low daily average cost, good load characteristics, high degree of DG consumption and high degree of resource aggregation, a multi-objective VPP construction model based on decision area division is established, and various constraints including geographic information are considered. The improved bat algorithm based on priority selection is used to solve this model. Finally, the correctness and effectiveness of the model are verified by an example.
... 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. ...
... 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. ...
It is apparent that future energy systems need increased flexibility for example due to wider adoption of variable renewable production, general transition towards decarbonization, and bidirectional energy grids. When several energy sectors are considered holistically, the possible flexibility measures increase. This paper reviews potential means to increase flexibility of Finnish energy systems by comprehensively regarding both electricity and thermal systems. After introducing renewable energy data from Finland, the authors discuss how flexibility is defined. Then, several technological options to meet the increased flexibility needs are described and Finnish examples are given. These key technologies and solutions include energy storage, district heating and cooling, electric vehicles, smart meters, demand response, and ICT solutions. In addition, energy markets provide important flexibility means. Therefore, aspects related to electricity market design and heat trading are also assessed.
... 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. ...
Eco-efficiency is achieved by creating more value with less environmental impact. Since small- and medium-sized enterprises (SMEs) are responsible for most of the production in the industrial output, their adoption of and awareness about elements of eco-efficiency is crucial for green growth. In this study, we investigate the attitudes of Turkish SMEs over three items concerning eco-efficiency: (1) increasing resource efficiency investments, (2) producing more environmentally compatible “green” products or services, and (3) the consumption of energy from renewable resources. To this end, we utilize data on Turkish SMEs from the 2017 wave of the Flash Eurobarometer, Small- and Medium-Sized Enterprises, Resource Efficiency and Green Markets (GESIS) dataset and conduct descriptive analyses. Our investigation of 299 SMEs from Turkey reveals that there is a distance between Turkish SMEs and the elements of eco-efficiency. Many firms criticize the administrative and legal barriers to resource efficiency investments and acknowledge the need for external support to improve resource efficiency. The results also indicate that most of Turkish SMEs are unwilling to produce green products or services. Furthermore, only a small fraction of the SMEs relies on renewable sources for self-generation. As SMEs construct a sizeable portion of the output in the economy, these results show that the contribution of SMEs to green growth will be lacking in the coming years, unless further action is taken, and supported by the Turkish government.
... 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. ...
Digital technologies are bringing a wide spectrum of business opportunities as well as significant organizational challenges for incumbent companies operating in traditional industries such as the energy one. The diffusion of new technologies is changing the way energy solutions are consumed and experienced, while consumers increasingly take ownership of their consumption, acting as “prosumers”. In this evolving scenario, incumbents are urged to reshape their business models, explore new opportunities and change their organizational structures accordingly. Still, the required organizational re-design process that enables companies to undergo business model innovation (BMI) while exploiting digital technologies is partially neglected in literature. Hence, this study explores how established companies embrace organizational re-design process to innovate their business model. To this end, we leverage a single case study methodology focused on an incumbent energy company. Our findings show how the establishment of a business unit dedicated to digital technologies exploitation has enabled the company’s BMI. More specifically, we point at the critical role played by the know-how and the industrial capabilities to sustain not only the innovation activities of the new business unit, but also the overall company performance and the shift towards a renewed business model.
... Respecto a la caracterización de modelos de negocio, un ejercicio de búsqueda permitió identificar trabajos orientados hacia sectores como las telecomunicaciones, editoriales, economía creativa, publicidad, tecnología, transporte y el sector bancario, entre otros (Bastos, Franchini, Azevedo, & Fornasiero, 2012;Eurich & Boutellier, 2014;Micheli, Schoeman, Baxter, & Goffin, 2012;Muyengwa, Dube, & Battle, 2012;Oyegoke, 2014;Randeree, Mahal, & Narwani, 2012;Reyes, Li, & Visich, 2016;Smith, 2016). En lo que respecta al sector HVAC y/o de eficiencia energética, los resultados están orientados hacia programas de ahorro en edificaciones (Bordner et al., 2000;Martínez Ceseña, Good, & Mancarella, 2015;Matar, 2016;Qiu, 2014), mientras que pocos están directamente relacionados con la caracterización o construcción de modelos de negocio en el sector (Bulut, Wallin, Stigson, & Vassileva, 2016;Helms, Loock, & Bohnsack, 2016;Knuckles, 2016), destacándose el trabajo de (Arenas, Gómez, & Baquero, 2010) que tenía como objetivo dar viabilidad a una empresa de servicios especializada en el suministro energético integral a edificios de viviendas ubicados en zonas urbanas, mediante un modelo de negocio que consiste en el abastecimiento de electricidad, ACS, calefacción y refrigeración de edificios de viviendas. El negocio de la ESE (Empresa de Servicios Especializada) estaría basado por una parte, en la venta de energía a sus clientes, en distintas formas como lo son: frío, calor y electricidad. ...
1. RESUMEN La literatura ofrece una gran cantidad de definiciones y conceptos acerca de modelos de negocio, para objeto de este estudio se define como un grupo de operaciones interdependientes que ayudan a descubrir las necesidades del mercado permitiendo que la organización se ajuste a estas con el fin de dar mejor respuesta al cliente final y generar valor. Este trabajo corresponde a la primera fase en la construcción de un nuevo modelo de negocios en el contexto de servicios de climatización para edificaciones. Se encuentra enmarcado en el desarrollo del proyecto Diseño, desarrollo y validación de un modelo de gestión energética de sistema de climatización de edificaciones en el sector terciario de la región Caribe colombiana para la mejora de la eficiencia energética y la sostenibilidad ambiental, que se desarrolla entre algunas de las más importantes universidades de Colombia. Se parte de una revisión y caracterización de los modelos de negocios existentes relacionados con el suministro, comercialización y venta de frío-calor, mediante el uso de tecnologías limpias y eficientes en el mundo, con el fin de identificar cuáles deben ser las características de este tipo de modelos de negocio, que permitan el diseño y validación del nuevo modelo de negocios teniendo en cuenta el carácter innovador del mismo y su viabilidad dentro de la relación cliente-proveedor que permita ofertar frío en ambientes previamente caracterizados integrando las variables del sistema correspondiente al sector terciario. Esto constituye innovación en Colombia ya que actualmente no se cuenta con modelos de esta naturaleza, lo que contribuirá a construir proyecciones a escalas en el consumo del frío con sus respectivas implicaciones en el consumo energético y tarifario. La revisión se lleva a cabo a través de búsqueda en bases de datos especializadas, tesis doctorales y de maestría, trabajo de campo y otras fuentes secundarias.
... 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]. ...
To correct grid imbalances and avoid grid failures, the transmission system operator (TSO) deploys balancing reserves and settles these imbalances by penalizing the market actors that caused them. In several countries, it is forbidden to influence the grid imbalances in order to let the TSO retain full control of grid regulation. In this paper, we argue that this approach is not optimal as market actors that trade imbalances under the supervision of the TSO can help balancing the grid more efficiently. For instance, some systems such as solar farms cannot participate in the standard balancing market but do have economic incentives to help regulate the grid by trading with imbalances. Based on this argument, we propose a new market framework where any market actor is allowed to trade with imbalances. We show that, using the new market mechanism, the TSO can keep full control of the grid balance while decreasing the balancing cost. This is of primary importance as: 1) novel approaches to reduce grid imbalances are needed as, while renewable sources are generally not used for grid balancing, the increasing integration of renewable energy sources creates higher imbalances. 2) While long-term storage of energy is key in the energy transition, it needs to become an attractive investment to ensure its widespread use; as we show, the proposed market can guarantee that. Based on a real case study, we show that the new market can provide 10–20% of the total balancing energy needed and reduce the balancing costs.
... 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). ...
... 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 . ...
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.
... Earlier, Ilieva et al. [32] described the Smart Energy Service Provider, the local market structure and relationships and its platform. Helms [33] defined four new business models of flexibility creation based on interviews and industry research. Additionally, the Smart Grid Coordination Group [34] specified the general framework for flexibility markets at a high level. ...
This paper presents a general description of local flexibility markets as a marketbased management mechanism for aggregators. The high penetration of distributed energy resources introduces new flexibility services like prosumer or community self-balancing, congestion management and time-of-use optimization. This work is focused on the flexibility framework to enable multiple participants to compete for selling or buying flexibility. In this framework, the aggregator acts as a local market operator and supervises flexibility transactions of the local energy community. Local market participation is voluntary. Potential flexibility stakeholders are the distribution system operator, the balance responsible party and end-users themselves. Flexibility is sold by means of loads, generators, storage units and electric vehicles. Finally, this paper presents needed interactions between all local market stakeholders, the corresponding inputs and outputs of local market operation algorithms from participants and a case study to highlight the application of the local flexibility market in three scenarios. The local market framework could postpone grid upgrades, reduce energy costs and increase distribution grids' hosting capacity.
... China itself are rather idiosyncratic, but the findings of this study might still be partially applicable to other settings and industries also. A case in point is the European energy industry which is currently undergoing a transition towards smart grids (Helms et al., 2016). While the grid is connected, each European member state has different policies in place for instance with regard to demand response technologies or self-consumption policies, often due to vested interests of national players. ...
The Chinese government has implemented a comprehensive strategy to push low-emission vehicles (LEVs). Local municipalities have played an important role in this transition. Programmes such as the "Ten Cities Thousand Vehicles" (TCTV) created local niches for the development of LEVs in which public and private actors can experiment without market pressures. However, often the setup of the local niches has favoured local companies which led to incompatibility across provinces and barriers to diffusion. This article aims to explore the dynamics in the local niche and how the niche has been shaped by local protection and firm responses. Heeding the call for a better conceptualization of the spatial dimension in sustainability transitions, we draw on the recent second generation, multi-scalar multi-level perspective (MLP) and conceptualize the local niche. Based on our empirical results we find four ideal type local niches-the open niche, the technology shielding niche, the market shielding niche and the closed niche-and distill respective firm responses. This has important implications for policy-makers and managers in China and for industries in sustainability transition in general.
... 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. ...
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.
... [67]- [70]. Similarly, researchers in the energy sector have focused on identifying business model typologies, such as energy service companies and aggregators [71]- [74]. However, the use of business model ontologies to describe business model types and to analyse, design, and evaluate them remains limited. ...
The energy industry is changing rapidly because of increasing societal and political pressure to reduce CO2,changing customer needs, changing regulations, and new technologies. The changes render the traditional business models of energy businesses obsolete. To ensure success and long-term survival, energy businesses need to explore viable new business models.
Currently applied methods, such as business model ontologies, tools, and techniques do not fully support the design and evaluation of viable energy business models in a business ecosystem setting. The applied methods largely ignore relevant business model design perspectives, such as service/product, focal actor, business ecosystem, and
technology. Moreover, they also use elements of business model design inconsistently, such as business model design principles, business rules, configuration techniques, and design choices.
In this research, a business model design framework for viability is developed and validated to address the above deficits. The framework is validated using two case studies. The first study involves a mono-commodity energy system with a community-owned solar farm. The second involves a multi-commodity energy system that integrates heat and electricity networks at an industrial park. Experts evaluated the output of the framework (i.e., the business models) positively
... Much attention is paid to BMs of mono-commodity systems. Helms et al. (2016) identify four mono-commodity reference models that are used to exploit flexibility in electricity systems. Hall and Roelich (2016) position complex value propositions as an important source of business model innovation. ...
(LINK: https://authors.elsevier.com/a/1WX-a3QCo9Q-MT)
In this paper, a multi-commodity energy business model for an industrial park is designed and evaluated using the extended “business model design framework for viability”. The framework has been validated earlier for mono-commodity energy systems. Our goal is to examine the application of the business model design framework for viability for multi-commodity energy systems as they are more complex. The framework was applied to an industrial park, where heat and electricity networks are integrated. The business model was designed iteratively to harvest and exploit the flexibility embedded in the industrial processes of the heat consumers. The first iteration showed that the business model design framework for viability was largely successful. However, adding two extensions to the framework helps to deal with the complexity of designing and evaluating viable business models for multi-commodity energy systems in a better way. First, the configuration techniques in the framework are extended to include reference business models. Second, the evaluation criteria in the framework are extended to include the capabilities of the stakeholders. The extended business model design framework for viability better enables the design of complex business models and allows to evaluate the capabilities of the stakeholders to implement the designed Business model. The extended business model design framework for viability successfully facilitated the design and evaluation of a viable multi-commodity energy business model and therefore is corroborated.
... Increasing shares of fluctuating renewable energies have enhanced the need for flexibility to avoid imbalances in the power system. Established and new companies develop novel business models to provide flexibility (Helms et al., 2016). Decentralization trends in the energy market offer new opportunities for matching supply and demand in a distributed manner. ...
Rising shares of fluctuating renewables increase the need for flexibility in the power market. At the same time, the emergence of the prosumer has created new opportunities for co-creation of distributed flexibility. As of yet, there is surprisingly little empirical analysis in terms of whether individuals are actually ready to co-create flexibility, and if so, under which conditions these resources can be mobilized by grid operators or electricity supply companies. We address this gap in the energy economics literature with three studies analyzing in total 7′216 individual decisions in a series of choice experiments with 902 study participants in three main domains of residential energy prosumption: (1) solar PV plus storage, (2) electric mobility, (3) heat pumps. We develop a novel measure of the prosumers’ willingness to co-create flexibility, and solicit their preferences for power supply contracts with varying levels of flexibility to derive implied discomfort costs. Our results indicate that current and potential electric car and solar PV users exhibit a higher willingness to co-create flexibility than heat pump users. Reaping the potential in those two domains requires taking the prosumer perspective into account when designing policy instruments and creating adequate 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. ...
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.
... The project main objective is the local energy markets development. Innovative business models are being proposed and promoted to take advantage of the flexibility of generation, load and storage units at distribution level [20] and these models are setting the rules of the local markets operation [21]. On the other hand, an ICT platform is being designed to manage this flexibility based on the suggested business models. ...
Ensuring resilient operation and control of smart grids is fundamental for empowering their deployment, but challenging at the same time. Accordingly, this study proposes a novel methodology for evaluating resilience of Information and Communication Technology (ICT) systems for smart distribution grids. Analysing how the system behaves under changing operating conditions a power system perspective allows to understand how resilient the smart distribution grid is, but the resilience of the ICT system in charge of its operation affects the overall performance of the system and does, therefore, condition its resilience. With the aim of systematising the evaluation of ICT systems' resilience, this study proposes to combine a standardized modelling of Smart Grids, the Smart Grid Architecture Model (SGAM), with a data structured diagram, the Entity Relationship Model (ERM). The architecture of smart distribution grids is analysed through SGAM. Then, their technical characteristics and functionalities are defined and represented in a ERM diagram. Finally, the attributes or properties of the system components are used to formulate resilience indicators against different types of disturbances. This methodology is then applied to analyse the resilience of a ICT platform being developed in EMPOWER H2020 project.
... 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). ...
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.
... On the one hand, innovative business models are being proposed and promoted to take advantage of the flexibility of generation, load and storage units at distribution level [8]. These business models are setting the operational rules of the local markets operation [9]. On the other hand, an ICT platform is being designed to manage this flexibility based on the suggested business models. ...
... 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]. ...
Local power markets constitute one of the most radical transformations in the current energy system: integrating renewable energy and selling it at the source of generation. This chapter focuses on business model opportunities in local power markets and on the factors that predict the models' diffusion and acceptance by local citizens. Based on EMPOWER's local power market design, it describes two ideal‐type business models. The first focuses on a platform that is hosted by a distribution system operator. It outlines a business model in which a host company acts as platform provider for individual customers. The second model showcases a business model that targets cooperatives as the customer segment and host of the platform. Social acceptance is a major predictor of business model success. An important aspect of more‐sided digital business models is the process of co‐creating value.
This paper presents a new local economic dispatch
composed of local renewable energy sources, flexible and nonflexible
residential loads, in combination with a retail market. The
developed model is based on a two-stage stochastic mixed-integer
programming model, whose objective function minimizes the operational
costs of the local energy community. The mathematical
formulation is composed of three blocks of constraints such as
cost, balance and flexibility constraints. The main decisions are
the energy bought from the retail market, the flexible amount of
residential load to be increased or decreased in each scheduling
period, and the excess of generation from the prosumers to be
injected into the network and sold in the retail market. A case
study covering a day-ahead time frame with 24 hours of operation
and residential end users quantifies the various cost components
related to energy consumption, local generation and flexibility.
Conventional electrical networks are slowly changing. A strong sense of policy urge as well as commitments have recently been surfacing in many countries to integrate more environmentally friendly energy sources into electrical systems. In particular, stern efforts have been made to integrate more and more solar and wind energy sources. One of the major setbacks of such resources arises as a result of their intermittent nature, creating several problems in the electrical systems from a technical, market, operation and planning perspectives. This work focuses on the operation of an electrical system with large-scale integration of solar and wind power. In order to cope with the intermittency inherent to such power sources, it is necessary to introduce more flexibility into the system. In this context, Demand Response, Energy Storage Systems and Dynamic Reconfiguration of the system are introduced and the operational performance of the resulting system is thoroughly analyzed. To carry out the required analysis, a stochastic MILP operational model is developed, whose efficacy is tested on an IEEE 119-bus standard network system. Numerical results indicate that the joint integration of various flexibility mechanisms into the system can support a seamless integration of large-scale intermittent renewable energies.
There is a growing recognition that local electricity markets (LEMs) for distributed power resources are technically and economically feasible. However, the conditions under which these markets can create value for prosumers and consumers (P&C) and ensure overall welfare for society are insufficiently understood. To help address this literature gap, this paper takes China as a case to study a local electricity market that is driven by peer-to-peer trading. The results show that peak-valley tariffs increase cost-savings for P&C at the expense of grid revenue and the larger the peak-valley spread, the greater the benefits to P&C and, hence, losses to the grid. In addition, the study finds that the value of solar PV declines when deployment of solar technology increases linearly with storage installation in the market. Because the declining value of variable renewable energy may be especially problematic in wholesale electricity markets (WEMs), this study argues that as long as storage installation increases at a faster rate than variable renewable energy deployment, LEMs that operate independent of the central grid can potentially offer a more cost-effective option for large-scale renewable energy utilization. These results underscore the importance of government policies that seek to promote the development of LEMs.
The development of an increasingly decentralized, renewable power supply requires adequate planning approaches. Compared to unit commitment planning in regulated markets with a dominant share of dispatchable power generation, power systems with large shares of intermittent renewable power sources such as wind or photovoltaics are subject to uncertain supply as well as uncertain load forecasts and prices. Virtual Power Plants have been developed to aggregate intermittent renewables with so-called flexibility options, which include dispatchable power plants, storage systems and flexible power consumers. Dispatchable power plants, such as biogas plants, include all that can actively be committed to supply power in a time interval. Storage systems, such as pumped-storage hydroelectricity, can store power in times of low prices and resell it when prices rise. Flexible power consumers, such as operators of electric vehicles, can attempt to use these time windows to load the batteries, lowering their power purchasing costs. In the current German power market, power can be traded either in auctions on the day before physical delivery or in continuous intraday trading on the day itself. To determine optimal schedules for flexibility options in the context of day-ahead or intraday markets, a two-stage unit commitment model is presented to deal with the uncertainty of market prices resulting from the interplay of power generation in wind turbines and photovoltaic cells one the one hand with power demand on the other.
Heuristic decision-making based on simple rules can help managers to address a venture's most critical bottlenecks to seize business opportunities, especially in highly complex and dynamic contexts such as green energy activity. Unleashing that potential requires the simple rules to be accountable. However, identifying and addressing the bottleneck necessitates choosing the right evidence base, and choosing the evidence base is only possible when the bottlenecks are known beforehand. Due to this challenge, managers face a dilemma in developing simple rules. We suggest a novel approach to address this dilemma that integrates the principles of simple rules and data-driven mathematical optimization, and demonstrate its feasibility in the highly complex and dynamic context of green energy. Based on the results of this study, we develop and discuss far-reaching implications for theory, practice, and policy, and provide attractive avenues for future research.
Business models (BM) are, at present, a dynamic model that is continuously evaluated. The main research approaches are analyzing BM from different perspectives: resource oriented, transaction narrative and also from an entrepreneurship perspective. There remains to be seen how new business models are defined based on innovation and technological improvements for the distribution of renewable energy. Nowadays, on the global political agenda, renewable energy is a solution for reducing the greenhouse gases and their impact to climate change. In order to fulfill the European Union targets for reducing the greenhouse gas emission the EU countries introduced promotion models for renewable energy that are also an opportunity for new business ideas. The selected case studies analyze the main support schemes that are implemented in Europe, for example the Feed in Tariff in Germany and Green Certificates in Romania. Unfortunately, the process of transition to renewable energy is not so easy. The authors are analyzing the main obstacles related to the development of renewable energy and based on a questionnaire research studies they further analyze the main risk factors in the photovoltaic sector in Romania. This chapter should give an overview about the business models and the related opportunities and obstacles for the transition to renewable energy in Europe.
The increasing popularity of electric vehicles (EVs) is known to amplify the already present peaks in electricity demand. The possibility to remotely control and influence the charging of many EVs using the Internet of Things (IoT) via an aggregator has been proposed to optimize resource usage, to alleviate peak problems, and to exploit revenues that may be harnessed from fluctuating electricity prices. However, so far, the potential hinged on the acceptance of users, particularly the willingness to change their charging behavior. In this study, we develop an unobtrusive and easily implementable optimization method. Its effectiveness is tested on 360,000 charging sessions at public charging points in Amsterdam during the year 2015, providing a realistic assessment of the effects of optimization in terms of reduced costs, change in peak demand, and long occupancy of charging points. Based on the model, an average reduction of electricity costs between 20% and 30% can be achieved, depending on the day of the week. We also show that changing EV owner’s charging preferences such as starting earlier or later can benefit certain groups of EV drivers substantially and reduce electricity charging costs up to 35%.
Energy markets are rapidly changing with smarter, connected, more reliable infrastructure and cleaner generation on the supply side, and more choice, greater control and enhanced flexibility for customers. This paper examines willingness to pay for bundled smart home energy products and information services, using data from a set of two discrete choice experiments that were part of a survey by the regional energy provider of upstate New York. To let the data reveal how preferences are distributed in the population, a logit-mixed logit model in willingness-to-pay space and a combination of observed and unobserved preference heterogeneity was specified and fitted. Results show that residents of Tompkins County are willing to pay more than in other counties for residential storage, and that for home energy management there is an important generational divide with millennials being much more likely to perceive the economic value in the smart energy technologies. The flexible logit-mixed logit estimates provide evidence of important heterogeneity in preferences: whereas most of the population has a positive—albeit rather low—valuation of smart energy products and services, there is a considerable percentage of customers with negative perceptions.
Wind and solar power generation have been rapidly increasing on a global scale; this increase is limited by the capacities of the existing grids at maintaining balance between supply and demand to accommodate the fluctuations of these renewable energy resources. Therefore, grid flexibility has become a key factor in power systems. This study focuses on demand response business models (DRBMs), which have great potential for fostering energy flexibility in a cost-efficient and sustainable manner. Based on the literature review and empirical data from a case study, a business model analytical framework is proposed to explore the demand response potential based on value proposition, value creation and delivery, and value capture. This DRBM framework is characterised by nine elements: flexibility product, flexibility market segment, service attributes, demand response resources, resource availability, demand response mechanism, communication channels, cost structures, and revenue model. Based on this framework, a visualisation tool is proposed to help researchers and practitioners understand, integrate, and develop flexible electricity products. The application of this tool is then presented for electric vehicles as an example. The tool is valuable for evaluating the initial and untapped potentials of commercial demand response in electricity markets. This study thus contributes to the body of demand response literature via development of a holistic approach to assist recognition and creation of business models in emerging electricity markets.
Creating new business models is crucial for the implementation of clean technologies for industrial decarbonization. With incomplete knowledge of market processes and uncertain conditions, assessing the prospects of a technology-based business model is challenging. This study combines business model innovation, system dynamics and exploratory model analysis to identify new business opportunities in a context of socio-technical transition and assess their prospects through simulation experiments. Furthermore, insights are visualized in a roadmap to coordinate action among the actors involved. This combination of methods is applied to the case of a business model aiming at ensuring stability of the electrical grid by centralizing the management of flexible loads in industrial companies. A system dynamics model was set up to simulate the diffusion of flexible electrification technologies. Through scenario definition and sensitivity analysis, the influence of internal and external factors on diffusion was assessed. Results highlight the central role of energy costs and customer perception. The chosen combination of methods allowed the formulation of concrete recommendation for coordinated action, explicitly accounting for the various sources of uncertainty. We suggest testing this approach in further business model innovation contexts.
It is challenging to engage customers in demand response programs, which require significant interventions in customers’ normal energy consumption patterns. Moreover, little is known about how customers can be motivated to adopt innovations that promote collective benefits. This research investigates the effectiveness of the two most basic elements of incentive-based policies — reward and punishment — with regard to customer participation in the sustainable energy domain. We counter the prevailing assumptions in innovation and technology research that favor the use of reward rather than punishment to engage customers. Based on a series of experimental studies, we find mixed evidence. It appears that punishment is at least as effective as reward in engaging customers in sustainable technology innovations. Even more importantly, both reward and punishment are shown to overcome concerns relating to technology. Moderated mediation reveals that economic incentives and disincentives ameliorate critical obstacles because customers more strongly favor their own personal benefit over the collective benefit and are more willing for ‘self-serving’ reasons to adopt technology that contributes to collective benefits. The findings of this research thus have novel practical and theoretical implications for energy innovation involving customers.
Creating new business models is crucial for the implementation of clean technologies for industrial decarbonization. With incomplete knowledge of market processes and uncertain conditions, assessing the prospects of a technology-based business model is challenging. This study combines business model innovation, system dynamics and exploratory model analysis to identify new business opportunities in a context of socio-technical transition and assess their prospects through simulation experiments. Furthermore, insights are visualized in a roadmap to coordinate action among the actors involved. This combination of methods is applied to the case of a business model aiming at ensuring stability of the electrical grid by centralizing the management of flexible loads in industrial companies. A system dynamics model was set up to simulate the diffusion of flexible electrification technologies. Through scenario definition and sensitivity analysis, the influence of internal and external factors on diffusion was assessed. Results highlight the central role of energy costs and customer perception. The chosen combination of methods allowed the formulation of concrete recommendation for coordinated action, explicitly accounting for the various sources of uncertainty. We suggest testing this approach in further business model innovation contexts.
Creating new business models is crucial for the implementation of clean technologies for industrial decarbonization. With incomplete knowledge of market processes and uncertain conditions, assessing the prospects of a technology-based business model is challenging. This study combines business model innovation, system dynamics, and exploratory model analysis to identify new business opportunities in a context of sociotechnical transition and assess their prospects through simulation experiments. This combination of methods is applied to the case of a potential business model for Distribution System Operators aiming at ensuring the stability of the electrical grid by centralizing the management of flexible loads in industrial companies. A system dynamics model was set up to simulate the diffusion of flexible electrification technologies. Through scenario definition and sensitivity analysis, the influence of internal and external factors on diffusion was assessed. Results highlight the central role of energy costs and customer perception. The chosen combination of methods allowed the formulation of concrete recommendations for coordinated action, explicitly accounting for the various sources of uncertainty. We suggest testing this approach in further business model innovation contexts.
This chapter sheds light on the business model concept, its main components and how it can be used to analyze the impact of smart grid (SG) technology to create, deliver and capture a value for utility businesses. The business model concept is based on two theories of management: the resource‐based view and transaction cost economics. The traditional electricity value chain has within it the generation, transmission, distribution, retail and consumption guide from energy source to end use. Electricity markets possess retail and wholesale components. Advancing a new business model (BM) needs a deep comprehension of basic consumer needs, why competitors did not manage to meet those needs, as well as the technological and organizational trajectories. The chapter presents a review of different business models which have previously been proposed for the SG. Blockchain technology improves the market role of customers and producers. Blockchain addresses complex issues for the future digital energy system.
We propose a dynamic investment model to study investment behavior for power grid-stabilizing, flexibility-providing energy projects. Our model adds to the literature in several novel ways. First, we use time series-based optimization approaches (i.e., a single-unit commitment model) to determine, validate and parametrize exponential Ornstein–Uhlenbeck (OU) revenues as a state variable for the real options model in a biogas plant flexibilization case study. Second, from a theoretical perspective, our findings suggest that for specific revenue processes (i.e., exponential OU processes) the well-known option-driven incentive to wait acts alongside a new uncertainty-driven intrinsic investment incentive. Hence, higher uncertainty may lead to earlier investment. Third, we show how the results influence managerial decision making in practice and can be used to shape the design of an optimal renewable support scheme.
The increasing share of variable renewable energy sources creates a need for flexibility resources in the power system operations. This paper presents suggestions for characterizing flexibility, including dimensions of time, spatiality, resource type, and risk in power systems. We present interrelations between these flexibility dimensions, products, services, and suitable market designs. In light of this, we discuss TSO–DSO coordination and optimal flexibility resource allocation.
A business model that combines solar photovoltaic and fishery plays a role to expand distributed renewable energy and improve rural economy development. However, the business model of solar photovoltaic fishery is encountering growing difficulties with revenues decreasing due to changes of policy such as withdrawal of photovoltaic subsidies and land control. The spreading of digitization in photovoltaic industry and rural areas provides new opportunities for innovation of traditional solar photovoltaic fishery. This paper focuses on multiple value propositions to discuss a digital business model based of solar photovoltaic fishery on a case with a local Chinese photovoltaic agricultural company. The study results show that the digital business model of solar photovoltaic fishery improves the operational efficiency of solar photovoltaic power generation, economic benefits of aquaculture, and the diversification of revenue sources of solar photovoltaic agricultural company and leasing company. The transformation of business model from traditional solar photovoltaic power generation and fishery business to digital service platforms can not only accelerate expansion of distributed renewable energy and be potential deployed globally but also assist photovoltaic agricultural company to effectively respond to policy change. Finally, this paper proposes that supportive policy may focus on advocating system coupling to expedite the development of distributed renewable energies based on digital technology, and digital photovoltaic combined with rural energy market and financial, which will advance development of renewable energy electrification and promote rural economic growth.
In the energy industry, Internet of Things technologies emerge in the form of smart energy products, like smart meters, which are expected to reveal new business potentials and offer value for customers. Through attractive business models, such technologies can generate economic value. However, until now, the existing research has not comprehensively identified, analyzed, and grouped together smart energy business models. Moreover, the literature has not placed smart energy business models under the concept of smart products and services. To address this gap, we review the literature through an information systems lens and assess the status quo of research on smart energy business models, identify relevant business model types, and propose a research agenda for future research on Internet of Things-based business models in the energy sector.
Energy conservation is expected to contribute significantly to climate change mitigation and energy security. Traditionally, energy companies have had strong role in providing Demand Side Management (DSM) measures. However, after energy market liberalization in Europe, energy companies' DSM activities declined. In response, the EU issued Directive (2006/32/EC) on energy end-use efficiency and energy services (ESD) to motivate energy companies to promote energy efficiency and conservation, closely followed by Directive (2012/27/EU) on energy efficiency (EED), requiring the setting up energy efficiency obligation schemes. Despite strong political and economic motivation, energy companies struggle to develop energy efficiency services in liberalised energy markets due to conflicting institutional demands, which arise from contradicting policy requirements and customer relations. The main challenges in developing new innovative energy efficiency services, evidenced by an in-depth case study, were (1) the unbundling of energy company operations, which makes it difficult to develop services when the contribution of several business units is required and (2) the distrust among energy end-users, which renders the business logic of energy saving contract models self-contradictory. On the basis of the research, avenues out of these dilemmas are suggested.
Marketing inherited a model of exchange from economics, which had a dominant logic based on the exchange of “goods,” which usually are manufactured output. The dominant logic focused on tangible resources, embedded value, and transactions. Over the past several decades, new perspectives have emerged that have a revised logic focused on intangible resources, the cocreation of value, and relationships. The authors believe that the new per- spectives are converging to form a new dominant logic for marketing, one in which service provision rather than goods is fundamental to economic exchange. The authors explore this evolving logic and the corresponding shift in perspective for marketing scholars, marketing practitioners, and marketing educators.
We explore trends in the deployment and integration of distributed generation in Germany, Denmark and Sweden. In particular, we examine the regulation of renewable energy generation with a focus on grid access and connection mechanisms. The high rate of distributed generation penetration in these countries is the result of early support given to the expansion of renewable energy generation – mainly wind and solar-within their respective national policies. Germany and Denmark are the countries with the most sophisticated support schemes, which have shown changes over time. In terms of connections, Germany is the country with the most favourable connection regime. It provides not only priority connection but also priority use of the grid to generation units that produce electricity from renewable energy sources. Sweden guarantees equal treatment among different technologies (i.e. a non-discrimination principle) and is thus the least favourable. High connection costs have been observed, especially in Germany and Denmark. The costs of network upgrades are usually socialised across customers. The use of smart solutions combined with novel business models might allow more efficient use of the current distribution electricity infrastructure. Hence, integration issues should be taken into consideration in order to avoid expansion of distributed generation in a way that unnecessarily raises total system costs, via high connection costs.
A growing body of research is drawing attention to the material practices that support verbal exchanges and cognitive processes in collective sensemaking. In this study, building on an ethnographic study of a design consulting firm, we develop a process model that accounts for the interplay between conversational and material practices in the transition from individual to group-level sensemaking, and we begin to unpack how the "materialization" of cognitive work supports the collective construction of new shared understandings.
In this paper, we present a longitudinal study of organizational responses to environmental changes that induce members to question aspects of their organization's identity. Our findings highlight the role of organizational culture as a source of cues supporting "sensemaking" action carried out by leaders as they reevaluate their conceptualization of their organization, and as a platform for "sensegiving" actions aimed at affecting internal perceptions. Building on evidence from our research, we develop a theoretical framework for understanding how the interplay of construed images and organizational culture shapes changes in institutional claims and shared understandings about the identity of an organization.
Business models are fundamentally linked with technological innovation, yet the business model construct is essentially separable from technology. We define the business model as a system that solves the problem of identifying who is (or are) the customer(s), engaging with their needs, delivering satisfaction, and monetizing the value. The framework depicts the business model system as a model containing cause and effect relationships, and it provides a basis for classification. We formulate the business model relationship with technology in a two-way manner. First, business models mediate the link between technology and firm performance. Secondly, developing the right technology is a matter of a business model decision regarding openness and user engagement. We suggest research questions both for technology management and innovation, as well as strategy.
Guidelines for determining nonprobabilistic sample sizes are virtually nonexistent. Purposive samples are the most commonly used form of nonprobabilistic sampling, and their size typically relies on the concept of “saturation,” or the point at which no new information or themes are observed in the data. Although the idea of saturation is helpful at the conceptual level, it provides little practical guidance for estimating sample sizes, prior to data collection, necessary for conducting quality research. Using data from a study involving sixty in-depth interviews with women in two West African countries, the authors systematically document the degree of data saturation and variability over the course of thematic analysis. They operationalize saturation and make evidence-based recommendations regarding nonprobabilistic sample sizes for interviews. Based on the data set, they found that saturation occurred within the first twelve interviews, although basic elements for metathemes were present as early as six interviews. Variability within the data followed similar patterns.
We build on an emerging strategy literature that views the firm as a bundle of resources and capabilities, and examine conditions that contribute to the realization of sustainable economic rents. Because of (1) resource-market imperfections and (2) discretionary managerial decisions about resource development and deployment, we expect firms to differ (in and out of equilibrium) in the resources and capabilities they control. This asymmetry in turn can be a source of sustainable economic rent. The paper focuses on the linkages between the industry analysis framework, the resource-based view of the firm, behavioral decision biases and organizational implementation issues. It connects the concept of Strategic Industry Factors at the market level with the notion of Strategic Assets at the firm level. Organizational rent is shown to stem from imperfect and discretionary decisions to develop and deploy selected resources and capabilities, made by boundedly rational managers facing high uncertainty, complexity, and intrafirm conflict.
I show how company strategies that focus on improving consumer benefits can create value by increasing consumer payments to an entire value system. This "consumer benefit experienced" viewpoint on value creation complements the value capture orientations of the firm positioning, transaction cost, and resource-based approaches. It helps to clarify often-blurred distinctions between value creation and value capture and offers an additional tool for addressing intractable issues in strategic management.
The analysis of the potential of emerging innovative technologies calls for a systems-theoretic approach that takes into account technical as well as socio-economic factors. This paper reports the main findings of several business case studies of different future applications in various countries of distributed power generation technologies, all based on a common methodology for networked business modeling and analysis.
This paper describes the process used by a research team to develop a coding system for analyzing data from interview transcripts and situates the process within approaches to qualitative analysis. Successive versions of the coding scheme illustrate its development over several years; the role of team members and verification in this evolution are discussed. Several lessons emerge from our experience: a) coding is not what happens before analysis, but constitutes an important part of the analysis; b) a team builds codes and coding builds a team through the creation of a shared understanding of the phenomenon; and c) collaborative qualitative research requires a kind of rigor that an independent researcher might not be aware of or need.
Marketing inherited a model of exchange from economics, which had a dominant logic based on the exchange of "goods," which usually are manufactured output. The dominant logic focused on tangible resources, embedded value, and transactions. Over the past several decades, new perspectives have emerged that have a revised logic focused on intangible resources, the cocreation of value, and relationships. The authors believe that the new per- spectives are converging to form a new dominant logic for marketing, one in which service provision rather than goods is fundamental to economic exchange. The authors explore this evolving logic and the corresponding shift in perspective for marketing scholars, marketing practitioners, and marketing educators.
- 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.
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.
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.
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.
Sustainable technologies challenge prevailing business practices, especially in industries that depend heavily on the use of fossil fuels. Firms are therefore in need of business models that transform the specific characteristics of sustainable technologies into new ways to create economic value and overcome the barriers that stand in the way of their market penetration. A key issue is the respective impact of incumbent and entrepreneurial firms’ path-dependent behaviour on the development of such new business models. Embedded in the literature on business models, this paper explores how incumbent and entrepreneurial firms’ path dependencies have affected the evolution of business models for electric vehicles. Based on a qualitative analysis of electric vehicle projects of key industry players over a five-year period (2006-2010), the paper identifies four business model archetypes and traces their evolution over time. Findings suggest that incumbent and entrepreneurial firms approach business model innovation in distinctive ways. Business model evolution shows a series of incremental changes that introduce service-based components, which were initially developed by entrepreneurial firms, to the product. Over time there seems to be some convergence in the business models of incumbents and entrepreneurs in the direction of delivering economy multi-purpose vehicles.
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.
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.
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.
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.
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
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.
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.
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.