Abstract
This research investigates the new opportunities that business model innovations are creating in electricity supply markets at the sub-national scale. These local supply business models can offer significant benefits to the electricity system, but also generate economic, social, and environmental values that are not well accounted for in current policy or regulation. This paper uses the UK electricity supply market to investigate new business models which rely on more complex value propositions than the incumbent utility model. Nine archetypal local supply business models are identified and their value propositions, value capture methods, and barriers to market entry are analysed. This analysis defines 'complex value' as a key concept in understanding business model innovation in the energy sector. The process of complex value identification poses a challenge to energy researchers, commercial firms and policymakers in liberalised markets; to investigate the opportunities for system efficiency and diverse outcomes that new supplier business models can offer to the electricity system.
Highlights
To achieve energy transitions, technological and business model innovation must co-evolve with policy and system regulation (Foxon, 2011)
Opportunity #1: better routes to market for local generation The current route to market for most distributed generation in the UK is through Power Purchase Agreements (PPAs) with a Third Party Licensed Supplier (TPLS) or market trader
One expert member of the DECC Local Supply Working Group noted in written submission: “In exploring community energy participation in local markets, we have been overwhelmed with interest from communities wanting to get a better value from their own generation....”
Summary
Technological and business model innovation must co-evolve with policy and system regulation (Foxon, 2011). Much of the literature on technical and business model innovation neglects the retail or ‘supply’ element of the energy value chain. In liberalised markets the dominant supply business model has been the corporate utility, selling units of energy to consumers in national markets (Hannon et al, 2013). Very little has been done by the energy research community to examine challenges to this dominant supply model, or the national scale at which it operates. Business models on smaller scales (from city-region to neighbourhood) have the n Correspondence to: School of Earth and Environment, University of Leeds, Room: 10.112, LS2 9JT, United Kingdom. Electricity supply business models that are designed to operate sub-nationally, pose a number of challenges to policymakers, regulators, and mainstream utilities
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