Local Values & Business Models: a look at energy services

Local Values & Business Models: a look at energy services

Dr Ralitsa Hiteva, SPRU, University of Sussex
Prof Tim Foxon, SPRU, University of Sussex
Mags Tingey, University of Edinburgh
Prof Jan Webb, University of Edinburgh

New business models for energy service provision will be important to the Net Zero transition: they can help to improve effective delivery of energy services, whilst also contributing multiple forms of value creation, particularly at the local level. The paper aims to unpack the types of local values (clean air, energy conservation, greater access to energy services, affordable energy, energy efficiency) and mechanisms for creating such value through energy services business models in the UK. This draws on analysis of emerging business models currently being implemented at local level, enabled by digital innovation, (including direct management by local actors and local authorities, municipal ESCOs, and new community owned energy cooperatives, etc.) as digital innovations are believed to be effective and accessible ways of overcoming the shortcomings of existing business models and increasing locally created and captured values.

The analysis combines insights from business models and institutional perspectives. By accounting for the institutional, regulatory and policy frameworks involved in shaping the energy system and business models, we identify the elements (e.g. institutions and technologies) at local level which enable or hinder creating and capturing local value from energy services. By evaluating the local contribution of business models for energy services, the paper contributes to understanding the role of energy as a carrier of local social, environmental and economic values. Many of these values are currently undervalued or excluded from the UK energy supply model.

The paper focuses on the case of business models for energy services and their contribution to creating, capturing and monetising local value. Examples include smart local integration, local tariffs and opening up of the transmission and distribution grids. This uses data collected between 2014 and 2019, through mapping emerging business models for energy services and local energy projects in the UK, including semi-structured interviews with innovators, policy makers, regulators, investors, energy companies, local authorities and energy cooperatives; an Innovation Forum; participatory observation and several workshops.

Although many emerging business models for energy services make claims about their local contributions, creating (direct) value for local users remains elusive and tricky for many. However, many business models depend on developing a value proposition that grows local demand. The paper contributes to critically unpacking what local value entails and how it is produced through emerging business models. This can inform the work of local authorities, local energy companies and cooperatives who are experiencing structural barriers to local value creation. In many cases, it is difficult to capture and assess these local values within established mechanisms for assessing payback or IRR, which can lead to scaling down and squeezing out of projects.

This paper contributes directly to the conference themes on Business models, digitalisation and markets, and challenges claims and assumptions about what innovative business models in energy services can deliver for the decarbonisation and decentralisation of energy in the UK, and the role they can play in meeting Net Zero objectives.