Impact of home market on business development and internationalization of demand response firms

Abstract

The transition toward more renewable-based energy systems increases the need for new flexible resources, such as demand response (DR). Previous literature has found various barriers for DR utilization, but much of this research has focused on the initiation of DR operations or barriers in national markets and not on factors that hinder market upscaling and firm internationalization. We address this gap by analyzing interviews with 22 DR companies active in Finland, one of the early mover countries for automated DR. While most of previous research has focused on electricity DR, our interviewees also include district heating DR companies. By using the Technological Innovation System (TIS) framework, we study how the advanced regulatory and market framework and the technology rollout in Finland have affected the DR service development and the internationalization of Finnish companies. Based on our results, the DR market formation in Finland has largely relied on the Finnish transmission system operator's early decision to allow independent aggregation and the early large-scale rollout of smart meters. The advanced home market has enabled firms to develop new solutions and prove their concept. Yet, the highly structured nature of energy markets complicates the access to both advanced and less advanced foreign markets.