Platform Markets and Energy Services

Abstract

AbstractA structural shift from transaction‐based, marginal cost pricing to fee‐based service business models often accompanies the emergence of “platform” markets, that is, multisided markets where an intermediary captures the value of the interaction between user groups. The many examples include telecommunications, data storage, cinema, music and media, and the automobile industry. This chapter explores how retail electricity supply can be conceived of as a platform‐mediated, two‐sided market and the consequences for pricing and market structure. The drivers of such a transition include the introduction of information and communication technologies, increased volatility due to renewable generation, and the new complexity of roles for end‐users. Through two cases, a balancing services provider for smart home energy management systems and an electric vehicle charge manager, we show where a platform entrant could position itself in the retail electricity markets between supply companies and end‐users. Conceiving of electricity as a platform market where new entrants provide an energy optimization and management service may stimulate a competitive ecosystem and innovation. Fee‐based pricing could enable the objectives of time‐varying pricing to be achieved without adversely affecting the most vulnerable customers.