STOCKHOLM SWEDEN 2020,
Business Model Design for Digital Energy Trading
Platforms
An Exploratory Study of Local Energy Market Designs
ISABELLE GRANATH
KRISTIN HOLMLUND
Business Model Design for Digital Energy Trading
Platforms
An Exploratory Study of Local Energy Market Designs
By
Isabelle Granath & Kristin Holmlund 2020-05-27
Master of Science Thesis TRITA-ITM-EX 2020:208 KTH Industrial Engineering and Management
Industrial Management SE-100 44 STOCKHOLM
Affärsmodeller för digitala energidelningsplattformar
En utforskande studie av lokala energimarknader
Av
Isabelle Granath & Kristin Holmlund 2020-05-27
Examensarbete TRITA-ITM-EX 2020:208 KTH Industriell teknik och management
Industriell ekonomi och organisation SE-100 44 STOCKHOLM
Business Model Design for Digital Energy Trading Platforms
Isabelle Granath Kristin Holmlund
Approved
2020-06-08
Examiner
Cali Nuur
Supervisor
Frauke Urban
Commissioner
Power2U
Contact person
Arshad Salem
Abstract
The traditional electricity market, holding centralized authority over consumers, is no longer adequate seeing a shift towards a more electrified, decentralized, and digitalized society. Increased energy prices, raising concerns about climate change, and tightening governmental regulations have resulted in that an extensive diffusion of renewable energy sources has evolved. This development is expected to change the structure of the sector, despite that an appropriate market design that can deal with these remains to be identified. The purpose of this study was to investigate how a business model of a digital platform, managing energy trading within a local community could be designed. This study contributes to a new dimension of energy transitions within a Multi-Level Perspective by studying a particular field of the transition in terms of flexibility market platforms. The rising need for flexible solutions, making the consumer a prosumer, and enabling shared energy through a digital platform involves uncertainty and challenges, where a suitable business model linking new technology to the emerging market needs to be defined. Despite the novelty of the research field of local energy markets, the aim of investigating business model designs for a local energy market platform has been reached through an exploratory case study and integration of theories from several fields.
This study makes an analytical contribution of investigating five pioneering projects, all developing digital platforms enabling integration of flexibility into the electricity market. This further contributes to the design-implementation gap of theories when developing a local energy market, by suggesting the most vital parameters to take into account. Based on the findings, a suggestion on a suitable business model design and a corresponding market design was developed. The main objective of the proposed market design is to serve as a basis to bring forward flexibility available from prosumers and their controllable demand and supply arrangement, including renewable energy technology generation and storage devices. The intention is to maintain a balanced and transparent distribution network at the lowest possible costs, while, at the same time functioning as reserve storage towards the main grid, reducing the risk of capacity shortage. Additional insights were raised that can be helpful in the evaluation of utilizing flexibility energy assets before making grid investments, following the recently presented recommendation of the EU's Clean Energy package.
Keywords: Local Energy Markets, Flexibility, Prosumers, Market Design, Multi-Sided Platform, Distributed Energy Resources, Aggregator, Business Model, Multi-Level Perspective
Examensarbete TRITA-ITM-EX 2020:208
Affärsmodeller för digitala energidelningsplattformar
Isabelle Granath Kristin Holmlund
Godkänt
2020-06-08
Examinator
Cali Nuur
Handledare
Frauke Urban
Uppdragsgivare
Power2U
Kontaktsperson
Arshad Salem
Sammanfattning
Den traditionella elmarknaden, karaktäriserad av en centraliserad styrning, är inte längre hållbar då utvecklingen av marknaden går mot ett allt mer elektrifierat, decentraliserat och digitaliserat samhälle. Ökande energipriser, växande oro för klimatfrågor tillsammans med en allt snävare reglering av energimarknaden har resulterat i en omfattande ökning av förnybara energikällor. Denna utveckling förväntas förändra sektorns struktur, där en lämplig marknadsdesign som kan hantera detta återstår att identifiera. Syftet med denna studie var att undersöka hur en affärsmodell för en digital plattform, anpassad för att hantera lokal energidelning, kan utformas. Denna studie bidrar till en ny dimension av energitransformationen från ett multi-nivå-perspektiv genom att studera ett särskilt område av övergången i form av flexibla marknadsplattformar. Det ökande behovet av flexibla lösningar, där konsumenter blir prosumenter och energi delas lokalt via digitala plattform innebär osäkerheter och utmaningar. En lämplig affärsmodell som kan anknyta de nya tekniska lösningarna som krävs till lokala energimarknader bör därav definieras. Trots att forskningsområdet som berör lokala energimarknader kan anses relativt nytt och delvis outforskat, har målet att undersöka affärsmodellkoncept för en lokal energimarknadsplattform uppnåtts genom en fallstudie och iterationer av teorier inom flertalet områden.
Denna studie bidrar med en analytisk undersökning av fem innovativa projekt som alla utvecklar digitala plattformar för att möjliggöra integrering av flexibilitet till elmarknaden. Detta bidrar även till det kunskapsgap som har identifierats mellan design och implementering fas vid utvecklandet av lokala energimarknader, genom föreslagna parameter som anses grundläggande och som bör tas hänsyn till. Baserat på resultatet presenterades ett förslag på en lämplig design för affärsmodell samt en tillhörande marknadsdesign. Huvudsyftet med den föreslagna marknadsdesignen är att utgöra en grund för gynnandet av en mer flexibel elektricitet hantering. Detta möjliggörs genom introduktionen av prosumenter till marknaden, där allt mer elektricitet produceras från förnybara källor och där konsumtion samt produktion regleras med hjälp av integrerade lagringsenheter. Målet är att upprätthålla ett balanserat och transparent distributionsnät till lägsta möjliga kostnad, medan marknaden även fungerar som ett reservlager mot kraftnätet, vilket minskar risken för kapacitetsbrist runt om i Sverige. Ytterligare insikter från denna studie påvisar hur de befintliga energitillgångarna kan utnyttjas på ett mer flexibelt och effektivt sätt, vilka stöds av de nyligen presenterade rekommendationerna från EU:s Clean Energy-paket.
Abbreviations
BM Business Model
BMC Business Model Canvas BMI Business Model Innovation DSO Distribution System Operator FPP Federated Power Plant LEM Local Energy Market P2P Peer-to-Peer
DER Distributed Energy Resource VRE Variable Renewable Energy RET Renewable Energy Technologies RES Renewable Energy Sources VPP Virtual Power Plant
MLP Multi-level Perspective
TSO Transmission System Operator
Table of Contents
1. Introduction ... 1
Background ... 2
Problem Statement ... 4
Purpose ... 4
Research Question ... 5
Case Description ... 5
Delimitations ... 6
Thesis outline ... 6
2. Literature Review & Theoretical Framework ... 8
Business Models ... 9
Flexible Energy Trading ... 15
The Prosumer Era ... 19
Multi-level Perspective on Energy Transitions ... 22
Business Model Canvas for Multi-sided Platforms ... 24
Business Models within the MLP ... 26
3. Method ... 29
Research Design ... 30
Research Process ... 32
Data collection ... 33
Data analysis ... 36
Research quality ... 38
Ethical considerations ... 39
4. Overview of the Current State & Future Trends ... 40
Overview of the Swedish Electricity Market ... 41
Trends and the Future Energy System ... 44
5. Empirical findings ... 46
Business Models of Applications ... 47
Findings from Interviews ... 54
6. Analysis and Discussion ... 65
Business Model Canvas applied for the Energy Transition ... 66
Market Design for Energy Trading Platforms ... 70
Stakeholder Acceptance of a LEM Transition ... 74
Market Design and Business Model Concept ... 78
7. Conclusion & Managerial Implication ... 81
Main Findings & Practical Implications ... 82
Theoretical Contribution ... 84 Limitations and Future Research ... 85 References ... 86 Appendix A ... I Appendix B ... II
List of Figures
Figure 1. Business Model Canvas based on Osterwalder et al., (2010) ... 10
Figure 2. Centralized (left) vs. decentralized (right) Power Generation System Developed by the authors ... 15
Figure 3. Categorization of Local Energy Markets (Teotia and Bhakar, 2014) ... 17
Figure 4. Decentralized Market Models (Parag and Sovacool, 2016) ... 19
Figure 5. Multi-level Perspective on Transitions (Geels, 2012) ... 22
Figure 6. Multi-sided platform BMC Developed by the authors based on Osterwalder et el. (2010) ... 24
Figure 7. Business Models as intermediates between nice and socio-technical regime (Bidmon and Knab, 2018) ... 27
Figure 8. Triangulation of the Study ... 31
Figure 9. Research Process ... 32
Figure 10. Analysis Process Developed by Creswell (2014) ... 36
Figure 11. Overview of Coding ... 37
Figure 12. The swedish electricity grid developed by the authors ... 41
Figure 13. Nodes Market Design (Nodes, 2020) ... 48
Figure 14. Nodes BM, synthesized by the authors ... 49
Figure 15. Enerchain local BM, synthesized by the authors ... 50
Figure 16. FED Market Design (Fed, 2019) ... 51
Figure 17. BM of FED project developed by the authors based on FED (2019) ... 51
Figure 18. Centrica Blockchain Infographic (Centrica, 2019) ... 52
Figure 19. Cornwall Local Energy Market bm Synthesized by the authors ... 52
Figure 20. xGrid BM Synthesized by the authors ... 53
Figure 21. Suggested Business Model Design ... 78
Figure 22. LEM Connected to the Platform ... 79
Figure 23. LEM and Conventional Grid ... 80
Figure 24. Vital Parameters of a Market Set-up ... 82
List of Tables
Table 1. The building blocks of the BMC developed by Osterwalder et al., (2010) ... 10 Table 2. Specifications of interviews ... 34 Table 3. Description of Application Cases ... 47
Acknowledgement
This master thesis is the final imprint we make on our studies at the Royal Institute of Technology (KTH). It was conducted during a special time, seeing an outbreak of a pandemic in the beginning of the process which made us rethink our methodologic visions. However, despite the special circumstances brought by the COVID-19 pandemic that forced us all to work from distance, we express our sincere gratitude to all our collogues at Power2U, especially to Arshad Salem who have provided great support and guidance for the progress of this thesis. We are also thankful to all interview participants of this study for giving us the opportunity obtain empirical findings valuable for this study, for taking their time to share their knowledge which was beyond anything we could have found in the literature.
Special thanks also go to our supervisor at KTH, Dr. Frauke Urban as well as seminar leaders Milan Jocevski and Cali Nuur, for their constructive feedback on the paper, and not to forget, our seminar peers.
To finalize, we would like to express gratitude towards each other, as being co-authors have been more of a blast than a struggle thanks to our positive attitude, despite the times of a pandemic and late working hours. We could not have wished for a better way to finish of our degree together.
May 2020, Stockholm Isabelle and Kristin
01
Introduction
This chapter provides an overview of the significance and relevance of the study through a background that leads to the central research problem. Further, the purpose of the study is explained along with the preliminary research questions, case description, and delimitation of the scope of the study.
1. Introduction
Background
The world is facing an inevitable transformation pressure where change needs to happen rapidly in order to be in line with sustainable development goals and to battle one of the greatest challenges of our time, climate change (de Pádua Pieroni et al., 2018). Increased energy prices, raising concerns about climate change, and tightening governmental regulations all together drive the need for improved energy efficiency (Li et al., 2017). The EU commits to reducing greenhouse gas emissions by at least 40 percent until 2030 with an expected share of 50 percent of renewables (Olivella-Rosell et al, 2018). This urgency of phasing out fossil fuels opens up windows of opportunities for businesses, while also receiving ever-advancing support from technology (Geissdoerfer et al., 2018).
Yet, companies experience challenges meeting sustainability targets. Difficulties are faced when transforming goals, objectives, and principles into concrete actions (Levi Jakšić, M., Rakićević, J.
and Jovanović, M., 2018), where previous literature points out that there is a need for change within the infrastructure of energy systems. Additional pressure on the system originates from combinations of mega trends, such as urbanization and electrified transport. This may lead to peak-loads in some areas that are too large in relation to the capacity of the grid (Karlsson and Dahlgren, 2019; The Royal Swedish Academy of Engineering Sciences (IVA), 2017). A transition replacing the centralized energy system based on fossil-fuels with a renewable-based decentralized energy system is vital for a low-carbon energy future (Koirala et al., 2016). This will require integration of digital solutions into the energy system to balance and optimize demand, as well as interconnected and collaborative participants that can manage high volatility and weather-dependent electricity generation (UIA, 2019).
The traditional energy system holds authority over passive consumers and lacks transparency and competition, affecting consumer trust and prices not being determined based on supply and demand (Oh et al., 2017). Although the politics around the electricity grids have remained relatively unchanged over the last century, the emergence of smart technologies and people's increased awareness of climate change have changed the mindset of consumers, while also the opportunities to become prosumers, who both generate and consume energy, have grown stronger (Jogunola et al., 2017). These developments are seen in Europe where the European Commission recently delivered a package of proposals fostering market-based flexibility with the aim to shape the EU to fulfill the Paris Agreement, combating climate change (Energimarknadsinspektionen, 2020; Schittekatte and Meeus, 2020). The definition of flexibility used within this study is based on the one presented by Eid (2017), to be the ability to manage external signals on the energy system to balance its generation and consumption, including production, storage, and demand response.
Eid et al. (2016) highlights that an increased number of people are already switching over to renewable Distributed Energy Resources (DERs), such as solar and wind power plants for electricity generation. With the rise of combining DERs into the energy mix, prosumers can create flexible markets, namely Local Energy Market (LEM) (Zhang et al., 2017). LEMs are recognized as a tool to improve utilization of existing resources and consist of the coordination of decentralized energy supply, storage, transport, conversion, and consumption within a specific geographical area (Eid et al., 2016). Any excess energy produced can either be stored for later use or supply others, uncovering
the opportunities for Peer-to-Peer (P2P) energy trading that can increase the efficiency and flexibility of local resources (Zhang et al., 2017). A global status report made by the international policy network, Renewables Now (REN21), shows that the global average share of renewables in electricity consumption was at a level of 26 percent during 2018 (REN21, 2019). Furthermore, research states that the diffusion of Renewable Energy Sources (RES) into the grid will significantly increase to exceed 60 percent by 2050 (Siano et al., 2019).
With the increasing share of RESs, Richter (2012) expect that the structure of the energy sector needs to change which opens up opportunities for creating new business models (BMs). The author further argues that the replacement of traditional centralized production and distribution will require a disruption of current strategies. Digitalization can be exemplified as an enabler of disruption that has influenced all sectors of society and has great potential in the energy sector to provide efficiency (Karlsson and Dahlgren, 2019). The mega trend has further resulted in an emerging platform economy. The use of digital platforms has evolved and spread to various sectors, simplifying human interaction and have become at the forefront of the shift towards a shared economy (Kenney and Zysman, 2016). The advancement of digital platforms within the energy sector, along with the rise of P2P energy trading has the potential to reconfigure how people could access, sell and buy energy with more transparency and control (Kloppenburg and Boekelo, 2019). However, the centralized energy grid infrastructure with a unidirectional flow is limiting these opportunities. To be able to increase DERs, a more bottom-up approach and a reorganized infrastructure is needed to create larger involvement of local operators (International Conference on the European Energy Market et al., 2016; Koirala et al., 2016).
A well applied framework when addressing socio-technical transitions, such as the those described above, is the multi-level perspective (MLP), used to understand changes and tensions towards a sustainable pathway (Wainstein and Bumpus, 2016). BMs are considered as being key drivers when bringing new technologies, opening for a low carbon power system transition (Wainstein and Bumpus, 2016; Huijben and Verbong, 2013). The field of literature that links BMs with socio- technical transitions can enhance the understanding of the need to shift towards sustainable development (Bidmon and Knab, 2014; Huijben and Verbong, 2013; Tongur and Engwall, 2014).
This thesis uses the Business Model Canvas (BMC) combined with the MLP, to address how to integrate technologies, stakeholders, and mechanisms to reach a socio-technical transition.
Problem Statement
Centralized authority over energy systems is no longer suitable seeing a change towards a more electrified, decentralized, and digitalized society (Siemens, 2019). An extensive diffusion of RESs has evolved, expected to change the structure of the sector (Richter, 2012), despite that an appropriate market design that can deal with these remains to be identified (Olivella-Rosell et al., 2018).
Furthermore, policy targets of having energy production based on 100 percent renewable sources in Sweden by 2040 are closing in (IVA, 2017). The need for a more decentralized energy system is high on the agenda of reaching the targets for the transition from fossil fuels to a renewable-based energy system (Koirala et al., 2016). The inconstancy connected with weather-dependent electricity generation requires great responsibility of all players to cooperate and interact (Karlsson and Dahlgren, 2019). However, new market actors, pushing incumbents for both a technological and societal shift involves tensions (Bryant et al., 2018; Wainstein and Bumpus, 2016). Utilities having dominating positions in the electricity sector will be confronted with disruptions of their current ways of doing business and face challenges following the development and stay competitive in the new market (Richter, 2012).
Further, digital platforms are emerging in many types of industries while implementation within the sector for energy trading into small local markets is yet unexplored (Zhang et al., 2017). This is further highlighted by Koirala et al. (2016), emphasizing that a more bottom-up solution would increase global welfare and capture advantages, yet, there is a gap of extensive evaluation in the case of implementation. The energy sector is usually conceptualized as a socio-technical system, including a variety of interrelated components resulting in a high level of complexity (Markard et al., 2012).
One aspect that has not played a significant role in the current market is an active customer interface management. Nevertheless, it is considered as being an essential element in the new market due to changed value propositions and increased consumer awareness (Richter, 2012). The rising need for flexible solutions making the consumer a prosumer, enabling shared energy through a digital platform involves uncertainty and challenges where a suitable BM, linking new technology to the emerging market, needs to be defined (Kavadias et al., 2016).
Purpose
The purpose of this study is to investigate how the business model of a digital platform managing energy trading within a local community could be designed.
Research Question
The following research question was defined to address the purpose of the study.
RQ: What business model design is suitable for a digital platform enabling Local Energy Markets?
Whereas relevant sub-questions were defined to address the main research question.
SQ1: How can business model theories be transformed to successfully implement digital platforms in practice?
SQ2: What market design could be suitable for a commercialized digital platform offering Energy Trading?
SQ3: What role do stakeholders play in enabling Local Energy Markets?
Case Description
The practical implication of this thesis intends to be applicable to the case described below, given by the company in which this study is performed in collaboration with. This particular case was selected based on being a project currently in the development phase, considered as having the potential of integrating flexibility into the infrastructure. The case was further used as a basis to determine the scope of this thesis.
1.5.1. TAMARINDEN
In 2016, a detailed development plan for a new residential area in the municipality of Örebro was approved, based on a future-proofed energy system (Örebro Kommun, 2019).. The area, characterized by innovative and sustainable technology solutions, creates conditions to reduce, produce, store, and share energy. The project, named Tamarinden, is planned to consist of 15 buildings with approximately 660 apartments. In comparison to a traditional residential area, all buildings will be connected to a local energy grid, managed by an electronic control unit. Residents will not have any electricity subscription with suppliers, instead charged for the electricity consumption via sub-measurements.
The project encourages the use of locally generated electricity and circular energy consumption, which will be enabled through installed solar cells on parts of the building. Additionally, storage in terms of batteries enables the transmission of excess energy to other buildings or traded to a nearby surrounding network, all facilitating a self-sufficient community.
Delimitations
Certain chosen delimitations will frame this scope of this study in regard to the thesis being based on a company-specific problem. The central field of this study lies within “energy trading,” a term used throughout the study. Still, the focus will be put almost exclusively on the application of electricity trading and actors of the electricity value chain, meaning that separate components of the energy sector, such as heat, oil, or gas, will not be taken into account. Further, considerations of existing regulations will be excluded from the practical implications of this project but will be raised in discussions and analysis. The scope of study will not be limited to a specific geographical area, yet, interviews with experts working on the case company as well as other global companies will be conducted in Sweden. Meaning that the study will mainly be relevant for companies within Northern Europe exploring similar opportunities.
Thesis outline
Chapter 1 – Instruction: This chapter provides an overview of the significance and relevance of the study through a background that leads to the central research problem. Further, the purpose of the study is explained along with the preliminary research questions, case description, and delimitation of the scope of the study.
Chapter 2 – Literature review & Theoretical Framework: This chapter provides a review of the literature comprising the areas: business models, energy trading and the prosumer era.
Understanding large-scale transitions to new ways of sharing energy requires analytical frameworks enabling a comprehensive overview of multiple approaches and interrelations between different actors and elements. This chapter also presents the main theories and frameworks which make out the base for the research. It provides elaboration of the Osterwalder et al., (2010) Business Model Canvas and Geels’ (2002) Multi-level perspective and the integration of the two frameworks on how business dynamics intersect with socio-technical transitions.
Chapter 3 – Methodology: This chapter describes the research design of the study followed by a summary of the research process. Further, the methods used for data collection of the pilot study and empirical investigation are presented followed by the methodology behind the data analysis. Lastly, the research quality in terms of validity and reliability is layered-out for and the ethical consideration explained.
Chapter 4 – Overview of the Current State & Future trends: This chapter provides an overview of the current Swedish Electricity Market, introducing main stakeholders along with their areas of responsibility. It also provides an overview of current laws and directives that regulate the market.
Lastly, the chapter highlights emerging trends and advancement in energy-related technologies.
Chapter 5 – Empirical Findings: The following chapter sets out to present the qualitative findings from the empirical study of existing applications of energy trading platforms where each application is synthesized into a BMC. The second part of the chapter outlines the main highlights from the interviews. The presented results will make out the base for the analysis and discussions.
Chapter 6 – Analysis & Discussion: The inter-disciplinary interviews with a wide range of areas of expertise captured various perspectives of the development of LEMs and platforms. These will be analyzed and discussed in this chapter in relation to the literature based on the theoretical framework of this study aiming to address the research questions. Firstly, the findings will be analyzed towards implications of developing a business model design. Secondly, implementation of an energy trading platform will be discussed in regard to market design and input from respondents. Lastly, the aspect of willingness will be outlined in terms of the LEM as a part of the energy transition which will make out the base of a stakeholder analysis and mapping.
Chapter 7 – Conclusion & Practical Implications: This chapter raises the main implications from the analysis and discussion to provide an answer to the main research question.
02
Literature Review & Theoretical Framework
This chapter provides a review of the literature comprising the areas: business models, energy trading and the prosumer era. Understanding large-scale transitions to new ways of sharing energy requires analytical frameworks enabling a comprehensive overview of multiple approaches and interrelations between different actors and elements. This chapter also presents the main theories and frameworks which make out the base for the research. It provides elaboration of the Osterwalder et al., (2010) Business Model Canvas and Geels’ (2002) Multi-level perspective and the integration of the two frameworks on how business dynamics intersect with socio-technical transitions.
2. Literature Review & Theoretical Framework
Business Models
As a result of the e-commerce boom of the 1990s, the last two decades have seen increased popularity for the concept of a BM (Geissdoerfer et al., 2018; Nosratabadi et al., 2019). This momentum was gained thanks to its simplicity of communicating complex business ideas to potential investors (Geissdoerfer et al., 2018). It has ever since then become a rapidly evolving field (Osterwalder et al., 2010), but there is no generally recognized definition of BMs (Richter, 2012). However, through a review of the literature, the most central components of the BM concept that are raised by several authors can be synthesized to the abstract representation of the value proposition, how value is created, captured and delivered (Geissdoerfer et al., 2018; Osterwalder et al., 2010; Richardson, 2008; Zott et al., 2011), which is the definition used within this paper. Basically, BMs make out the architecture consisting of the activities required of organizations to deliver its value proposition, including the internal infrastructure, customer interface, and pricing mechanisms (Richter, 2012).
It has been identified by Richter (2012) that scholars agree that a BM serves as a tool for analysis and management in research and practice, being especially relevant for industries enduring fundamental transformations. Contributions have been made by several authors to propose frameworks supporting the development of BMs for instance by Osterwalder et al., (2010);
Richardson (2008); Joyce and Paquin (2016); Teece (2018); Zott and Amit (2010). The motivations behind this can be traced to the effectiveness of BMs to represent planning, communication, as well as the facilitated implementation of complex organizational business ideas. The BMC developed by Osterwalder et al. (2010) is an especially well-known and practiced framework. It is based on design science methods and theory providing guidance to illustrate the business architecture to guide the creative phase of prototyping, collecting feedback, and improving iterations on innovating BMs (Joyce and Paquin, 2016).
2.1.1. THE BUSINESS MODEL CANVAS
A tool for describing, analyzing, and designing BMs has been developed by Osterwalder et al., (2010) referred to as the BMC. The definition of BM from which BMC has its roots is "the rationale of how an organization creates, delivers and captures value" (Osterwalder et al., 2010). The tool is suggested to be a contribution to the field of BMs in the way it creates a shared language that allows organizations to develop a blueprint-like BM for strategy implementation. The BMC is a preformatted chart that visualizes the nine building blocks proposed by Osterwalder et al., (2010), see Figure 1, and description of each block in Table 1, to form the basis for a helpful tool to describe, visualize, and to assess internal functions or competitors or any enterprise. These represent the logic of how a company intends to form activities to create, capture and deliver value.
FIGURE 1. BUSINESS MODEL CANVAS BASED ON OSTERWALDER ET AL., (2010)
TABLE 1. THE BUILDING BLOCKS OF THE BMC DEVELOPED BY OSTERWALDER ET AL., (2010)
2.1.2. BUSINESS MODEL INNOVATION FOR SUSTAINABILITY
Furthermore, the concept of business model innovation (BMI) has gotten a lot of emerging attention in the literature. Osterwalder et al., (2010) describes it as the replacement of outdated models through value-creation for businesses, customers and society. The research of the topic has expanded to cover broad application areas, mainly corporate diversifications, business venturing, and start-up contexts with the focus on BMI (Geissdoerfer et al., 2018). The authors further express BMI as either the design of new models for start-up contexts, the transformation of existing BMs or diversification and the acquisition of additional BMs. This thesis will focus on highlighting literature on BMI synthesized from the aspect of creating novel businesses, seeing an inevitable future of an industrial transformation of the energy sector.
Despite the benefits of BMI, Joyce and Paquin (2016) highlight that the focus on business thinking historically has failed to integrate a natural sciences-based notion of environmental limits of our planetary boundaries. Sustainability issues, in terms of environmental impact have only been observed from a distance and not adequately become addressed by companies, taking responsibility for its impact through reducing resource and energy use (Joyce and Paquin, 2016).
With the emerging pressure on businesses to react to sustainability concerns, such as the UN’s sustainable development goals, a field of sustainable BMs has developed, which has rapidly gained academic and practitioner interest (Geissdoerfer et al., 2018, Joyce and Paquin, 2016). Sustainable BMs describe how organizations could sustainably create value while satisfying goals regarding the economy, environment, and society (Geissdoerfer et al., 2018). This study mainly focuses on environmental aspects of sustainability. Current research reviews (Geissdoerfer et al., 2018;
Nosratabadi et al., 2019) describe the main reasons for the evolved field of sustainable BMs and emphasizes the benefits it will imply. Further, it is recognized that the research field of sustainable BMs is becoming more widespread among several industries and divisions due to external forces and urges from international and governmental organizations (Nosratabadi et al., 2019). These challenges arising with the urgency to respond to the sustainable responsibilities of organizations also open up opportunities to innovate for sustainability-oriented engagement (Joyce and Paquin, 2016).
Wainstein and Bumpus (2016) further raise BMs ability to alone serve as sustainable innovations if properly considered in the processes of value proposition, creation, and capture. Geissdoefer et al.
(2018) and Nosratabadi et al. (2019) argue that companies gain a competitive advantage and critical leverage to improve sustainability performance. However, Bocken et al. (2014) counters this through highlighting a key challenge of BM design to capture economic value for the companies themselves while delivering social and environmental benefits. Authors have further identified a design- implementation gap of sustainable BMI (Geissdoerfer et al., 2018; Nosratabadi et al., 2019).
Geissdoerfer et al. (2018) and Geissdoerfer et al. (2016) further raise the concern of the low number of tools available for guidance to companies.
2.1.3. ENERGY SECTOR TRANSFORMATION DEPENDING ON DIGITAL REVOLUTION AND TECHNOLOGICAL EVOLUTION
Looking especially at the energy sector, Richter (2012) signifies BM transformation as vital for incumbents currently being faced with an inevitable energy transition to low-carbon sources. A similar argument by Wainstein and Bumpus (2016) highlights BMI dynamics as key accelerators of the transition to low carbon power systems and their ability to do so independently of the underlying technology. However, the potential of the emerging technologies in parallel with the digitalization also raise the potential for shifts. It will require changes in the whole structure of the industry for the energy sector to transform towards a more sustainable production with an increasing share of RESs (Richter, 2012). The author suggests and exemplifies the use of BMs as an analytical framework to address the changes of companies as consequences of the emerging energy transformation since it is primarily identified to be concerned with questions of value creation and capture.
A review of the literature by Parida et al., (2019), further recognizes BMs as a critical factor in enabling sustainable industries through digitalization and highlights linkages between BMI, digitalization and sustainability benefits. Di Silvestre et al., (2018) also raise attention towards digitalization and additionally two phenomena of decentralization and decarbonization as current driving forces of change and years to come. We see a new era where an increasing number of industries have become "smart". The use of the Internet of Things (IoT) technologies, big data analysis, and predictive data modeling, enables automation and optimization that make processes more time-efficient, allowing cost savings (Parida et al., 2019). The main actors in the digital revolution are stated by the World Economic Forum to be cloud, IoT and Mobile (Di Silvestre et al., 2018). The cloud aid organizations process and analyze big data in real-time. At the same time, Mobile enables new business scenarios, and social channels enhance the ability to connect with customers immediately, instantly and inexpensively (Di Silvestre et al., 2018). Motivated by opportunities that follow, the experimenting of innovative BMs based on emerging tech is flourishing. A study by Capgemini (2020) further predicts that the lines between data-enabled services, energy equipment and infrastructure will continue to blur while being a part of the transformation process of the energy sector. However, the authors highlight the gap in research regarding how companies can leverage these digitalization opportunities to transform BMs to achieve sustainability advantages (Parida et al., 2019).
Tongur and Engwall (2014) further underline challenges and unclarities of the interaction between BMs and technological shifts, particularly for incumbents, as the risks of holding back vital changes affects the value proposition, creation and capture. Moreover, a study of BMs challenges addressing diffusion of Solar PV by Karakaya et al. (2016), exemplifies how new BMs within the energy sector can be obstructed by the existing ones while additionally being limited by policies.
2.1.3.1. BUSINESS MODELS AND DISTRIBUTED ENERGY SOURCES Decarbonization is a rising topic that is encouraged by international and national policies to be achieved through energy efficiency, low carbon energy sources, and RES technology within the fields of power generation, transport, and use (Di Silvestre et al., 2018). Additionally, the world sees grown involvement from consumers and increased demand that together open up for decentralization on the distribution level.
It is pointed out in the literature that awareness exists among energy utilities regarding the need for innovation and new BMs to handle the changes occurring within the energy sector (Bryant et al., 2018). The electricity prices have recently increased while costs for Renewable Energy Technologies (RET) manufacturing decreases, and governments introduce clean energy incentives, opening opportunities for new BMs (Wainstein and Bumpus, 2016). These developments have resulted in increased incorporation of DERs that include not only RET but also smart meters, batteries, and electric vehicles (Wainstein and Bumpus, 2016). This progress towards energy generation based on renewables increases the ability to create successful demand response programs that help overcome supply-demand mismatch (Wainstein and Bumpus, 2016). Additional contributing factors lie within socially active BMs to develop a smarter and more responsive power supply (Rodríguez-Molina et al., 2014; Wainstein and Bumpus, 2016). End-user co-operation is a vital part of enabling a two-way flow of the power system, making it more resilient, while also proven to be a success factor in community energy projects (Wainstein and Bumpus, 2016). Richter (2011) further points out a raised importance of customer relationship management for utilities of all scales with the increased competition within the energy sector, despite the fact that customer demand is not a primary driver for RET investments. Although several benefits are growing with the incorporation of DERs, it also brings complexity to the energy system making it difficult for existing utilities to adapt their BMs financially. Further, it also brings uncertainties of deviations, line losses that can lead to imbalance and subsequently higher prices to pay for consumers (Brown et al., 2019). Nonetheless, the rapidly emergent digitalization in combination with urban development offers opportunities for new BMs, creating novel exchange routes of goods and services based on the paradigm of ‘digital business’ via peer-to-peer and transparent transaction (Di Silvestre et al., 2018).
2.1.4. PLATFORM BUSINESSES
With the area of digital business, there are numerous types of platforms that have emerged and become discussed within the literature, based on various definitions and characteristics, all bringing different parties together (Gawer and Cusumano, 2014). The rise of digital platforms has opened up for radical changes in how we work, socialize, create value, and strive for profits (Kenney and Zysman, 2016). Essential for all platform businesses is the centrality of data, referred to as the basic resource that drives the firm and creates advantages over competitors. Business platforms have become a central resource for both tech and non-tech sectors, designed to extract and manage data through monitoring all interactions between concerned parties (Srnicek, 2017). Platforms enable flexible and dynamic businesses through facilitating an open and participative infrastructure that
things (Yablonsky, 2018). The application of big data and cloud computing, together with new algorithms, is predicted to change the structure of the economy and the nature of work (Kenney and Zysman, 2016).
The emerging digital platforms could be found in a growing number of industries, of which the energy sector is one of them (Yablonsky, 2018). Studies from the Energy Social Sciences indicate several possibilities from the development of energy platforms, where citizens could engage with energy and participate in the energy transition (Kloppenburg and Boekelo, 2019). A report from Siemens (2019) further raises attention to platform-based solutions as BMs focusing on consumers are becoming more significant as prosumers influence the energy landscape and are key in advancing towards a decentralized and two-way energy system. This way traditional passive consumers could be empowered to become both users and producers, managing their consumption, generation and storage of energy on their own (Geissinger et al., 2019). The use of decentralized ownership of assets, online platforms provides a digital environment that enables business and social activities by connecting users to resources, facilitating P2P transactions (Kenney and Zysman, 2016; Kloppenburg and Boekelo, 2019). A Multi-Sided Platform (MSP) is a type of business which creates value by facilitating the exchange of products or services among two or more distinct but interdependent groups of customers, meaning that value can only be created on one side if there is sufficient participation on the other sides of the platform (Osterwalder et al., 2010). These types of platforms have shown strong disruptive potential (Stummer et al., 2018). Take for example, AirBnB or Uber which used the platform as a BM and disrupted traditional industries like taxi and hotel services (Yablonsky, 2018). Previous research shares concerns about how this development of platforms has disrupted traditional businesses and become at the front-edge towards a shared economy (Geissinger et al., 2019; Pouri and Hilty, 2018), or the term preferable to Kenney and Zysman (2016), platform economy. These digital environments reposition the entry barriers and structure of the traditional economy as it changes the nature of how value is created and captured (Kenney and Zysman, 2016).
Despite the many beneficial opportunities, Pouri and Hilty (2018) argue that the potential impacts of the shift towards a shared economy should be evaluated in the context of sustainability. Most platforms do not possess physical infrastructures or assets but instead provide a service on top of these (Kloppenburg and Boekelo, 2019). A key promoting characteristic of digital platforms is agreed by Kloppenburg and Boekelo (2019); Pouri and Hilty (2018) to be providing on-demand access to existing products that, in turn, lowers the need for producing new products.
Flexible Energy Trading
Findings from previous publications regarding energy trading present different design approaches that are further discussed, analyzed and implemented (Eid et al., 2016; Mengelkamp et al., 2019;
Teotia and Bhakar, 2014). These could be divided into different set-ups, whereas the most central for this thesis are P2P energy trading, LEMs, and the traditional Conventional System. The main difference is whether the system is based on a centralized or distributed generation system, visualized in Figure 2. P2P energy markets apply direct trading of energy from small-scale DERs among local energy prosumers, mostly enabled by Information and Communication Technologies (ICT). P2P trading allows each peer to decide from whom to either buy or sell energy from based on costs, reliability, profit, etc. (Zhang et al., 2018). LEMs are the coordination of a decentralized energy system within a local geographical or virtual area, where the set-up could either be based on a centralized or decentralized market control (Ampatzis et al., 2014). Centralized market control could be implemented through the use of aggregators, while decentralized could include P2P trading, (Menniti et al., 2014). The combination of LEMs and P2P trading is referred to as Federated Power Plants (FPPs) (Morstyn et al., 2018). Contrary to P2P markets and LEMs, the conventional system is completely centralized and has a unidirectional flow instead of multidirectional (Zhang et al., 2018).
FIGURE 2. CENTRALIZED (LEFT) VS.
DECENTRALIZED (RIGHT) POWER
GENERATION SYSTEM DEVELOPED BY THE AUTHORS
There is a growing integration of DERs that have been explored by various scholars for different LEM concepts (Eid et al., 2016). When focusing on electricity distribution, authors refer to microgrids, smart grids, and virtual power plants (VPPs). Microgrids are clusters of DERs and loads, which operate either as a part of a power network or autonomously in an islanded mode (Morstyn et al., 2018). When integrating digitalized technologies into the microgrid, such as smart meters etc., microgrids become smart grids enabling simplified energy management (Parag and Sovacool, 2016).
Further, VPPs also called smart distributed generation control systems (482.solutions, 2019), are likewise collections of DERs, however, always connected to the grid using existing infrastructure (Morstyn et al., 2018). VPPs include the interplay of various energy sources and could suffice as a balancing tool for the electricity system (482.solutions, 2019).
2.2.1. LOCAL ENERGY MARKETS
The field of literature that covers local energy systems is a relatively new explored area, which has exponentially increased in the last two decades (Mengelkamp et al., 2019). The traditional market is facing challenges adapting to the new consumer-oriented market design consisting of new sources of energy generation, infrastructure, technologies, and increasing demand (Teotia and Bhakar, 2014).
Resulting in energy systems across the world are going through a radical transformation (Koirala et al., 2016). International Conference on the European Energy Market et al. (2016) argue that to make the current energy system more sustainable, reliable and affordable, the traditional energy management approach needs to be re-organized and no longer be based on a top-down approach.
Instead, their study suggests the introduction of LEMs (International Conference on the European Energy Market et al., 2016) - the coordination of decentralized energy supply, storage, transport, conversion, and consumption within a specific geographical area (Eid et al., 2016). This is further highlighted by (Koirala et al., 2016), arguing that a more bottom-up solution would increase global welfare and capture advantages. Further, authors argue that energy systems on a LEM could provide a greater balance for the system, locally as well as centrally, where energy residues could be utilized nearby including flexibility among end-users (Bremdal et al., 2017). However, there is a gap of extensive evaluation in case of implementation and united definitions as well as clear limitations within the area are still insufficient.
Current research is mainly focusing on specific cases including individual characteristics and circumstances, resulting in the absence of a holistic understanding of decentralized energy systems (Koirala et al., 2016; Mengelkamp et al., 2019). Yet, individual and specific cases result in approaches that vary greatly and difficulties in distinguishing a unique trend towards a generalizable approach (Koirala et al., 2016). However, Teotia and Bhakar (2014) have categorized LEMs according to its locality and drivers, promoting the planning, implementation and operation phase.
The structure of the market could be described in two different contexts, technical and economical.
The technical perspective covers characteristics such as power stability, voltage, frequencies, active and reactive power control, and additional features including technical components. The economical perspective, on the other hand, includes BMs, market structure, trading options, energy communities, and similar aspects (Teotia and Bhakar, 2014). Moreover, these markets differ in design depending on the configurations of the local power system, characteristics of market participants, and objectives
of the actors, including producers, consumers, suppliers, network operators, aggregators, etc.
(Ampatzis et al., 2014), see Figure 3.
FIGURE 3. CATEGORIZATION OF LOCAL ENERGY MARKETS (TEOTIA AND BHAKAR, 2014)
As illustrated in the figure above, ownership of LEMs could vary between community, local authority, private, and jointly (Teotia and Bhakar, 2014). Depending on the owner and type of usage, the markets could be formed either virtually or geographically, and could differ in size depending on participants (Steinheimer et al., 2012). Regardless, an important role that needs to be filled is the role of the market operator, taking responsibility for a market set-up including clearing and transaction management (Bremdal et al., 2017). Additionally, the market operator plays a decisive role in whether or not the market will be run monopolistic by network operators (DSOs or TSOs) or by a third party, and whether it is separated or integrated with other markets. Furthermore, the independence of the operator from market activities is discussed to be crucial in the matter of ensuring transparency and neutrality between buyers and sellers (Stanley et al., 2019; Schittekatte and Meeus, 2020). In regard to this, a third party is emphasized to assure this for the cases where both DSOs and TSOs are users of the same interface and where flexible markets are integrated with the wholesale market (Schittekatte and Meeus, 2020). However, the authors further highlight arguments opposing third party market operators due to interface management costs and risks for conflicts of interests.
Common for the different types is that they require active, involved, and interactive participants enabling the development of LEM. These integrated consumers result in increased understanding raising awareness of the environmental impact of energy consumption and generation, improving the link between local communities. The market platform is then formed by the market players, pricing mechanism, and market-clearing while the driving mechanism is counting of the installed power, type of load, and quantity of generated energy, together creating the delivery mechanism (Teotia and Bhakar, 2014).
2.2.2. LOCAL MARKETS WITH AGGREGATORS
As previously mentioned, several studies propose the integration of aggregators into the LEMs, resulting in a concept in between a completely P2P market and the traditional conventional system (Menniti et al., 2007; Morstyn et al., 2018; Olivella-Rosell et al., 2018). The authors point out the advantages of LEMs using aggregators as a local market operator, managing flexibility transactions (Morstyn et al., 2018; Olivella-Rosell et al., 2018) and having a non-profit entity aiming to maximize members utility (Menniti et al., 2007). The integration of aggregators enables centrally made decisions for local issues where the aggregator has a complete overview, making decisions to benefit the community as a group instead of individual participants. These aggregators could serve as a trading platform, sharing information, scheduling flexible devices, as well as trading flexibility (Olivella-Rosell et al., 2018). The author refers to this concept being based on the combination of value offered by VPPs and P2P energy trading platforms (Morstyn et al., 2018), defined as FPPs (Morstyn et al., 2018; Olivella-Rosell et al., 2018). The authors further highlight this concept as the natural development for the P2P energy trading platform, where a key objective is to provide a transparent mechanism, increasing the trust and acceptance from prosumers, allowing the market to balance their requirements together with their preferences (Morstyn et al., 2018).
The Prosumer Era
The growing integration of DERs results in traditional consumers becoming prosumers, meaning consumers who both consume and generate energy (Zhang et al., 2018), considered as key actors for a distributed and democratized energy future (Brown et al., 2019). Parag and Sovacool (2016) refer to local markets as the key for managing the distributed renewable generation and for coordinating decentralized market models. Advances in electricity generation and storage technologies have resulted in an increasing number of prosumers in European countries exploiting solar panels, electric vehicles, batteries, or other channels (Parag and Sovacool, 2016). Findings by Brown (2019) states that BMs addressing prosumers are most likely to succeed when delivering value for both prosumers and the wider energy system. Parag and Sovacool (2016) have identified three possible models with the potential to integrate the growing number of prosumers into the energy market; P2P prosuming models, prosumer-to-grid integrations, and prosumer community groups, see Figure 4.
FIGURE 4. DECENTRALIZED MARKET MODELS (PARAG AND SOVACOOL, 2016)
The first structure, see structure A in Figure 4, illustrates P2P markets, developed based on the sharing economy concept like Uber and Airbnb (Parag and Sovacool, 2016). When referring to a peer in P2P energy trading, authors apply to one or a group of local energy customers interconnecting directly, buying and selling energy services among each other without intermediate conventional energy suppliers (Zhang et al., 2018). These models include decentralized, flexible, and autonomous networks in which the distribution grid is paid a fee and tariff for its function depending on the character, the quantity of service, and distance between provider and consumer (Parag and Sovacool, 2016). Several authors from recent literature highlight the use of P2P communication channels when developing a platform for energy trading (Jogunola et al., 2017; Zhang et al., 2017). Even though the research is still in an early stage, primarily focusing on evaluating technologies to implement for the trading processes (Park and Yong, 2017), P2P trading is considered as a promising solution for handling necessary characteristics within the energy sector, such as high efficiency, flexibility and dynamicity (Jogunola et al., 2017). Where it has been shown that BMs for digital platforms within
other industries using sharing economy could be used as templates when developing LEMs (Bremdal et al., 2017).
The second structure, see structures B and C in Figure 4, illustrates two distinct ways of designing a prosumer-to-grid model. Both structures include prosumers being connected to a microgrid, aggregating or capturing the value of presuming energy services. Either by the grid itself is connected to the main grid, see structure B, or autonomously processes in a so-called island mode, see structure C. Microgrids that are interconnected to the main grid allow prosumers to generate as much electricity as needed, completely depending on the demand. On the other hand, with an island mode, prosumers are dependent on the generation and excess from the microgrid, which is an advantage only if storage and load shifting services are accessible. Lastly, the third market, Organized Prosumer Groups, see structure D in Figure 4, could be described as somewhat in between the two previously mentioned models. Serve the interest of a group of prosumers, including local communities, organizations, and neighborhoods managing their energy needs, balancing resources, and stakeholders.
2.3.1. ENERGY TRADING PLATFORM BUSINESSES
Apart from energy trading platforms allowing small suppliers to compete with large traditional suppliers and reducing transaction costs, these platforms offer three particular value-streams, energy matching, uncertainty reduction, and preference satisfaction (Morstyn et al., 2018). By scheduled storage systems and flexible loads, prosumers with matching demands and excess energy could obtain beneficial energy transactions, where the potential for local utilization of variable renewable sources increases (Boait et al., 2017). Reduced upstream generations, transmission requirements and reduced losses are being highlighted as a potential outcome increasing the energy matching (Steinheimer et al., 2012). In terms of uncertainty reduction, Boait et al. (2017) argue that prosumers are presumed to benefit from P2P platforms by enabling contracts as cooperative groups. This is also argued by Hvelplund (2006) mentioning co-operative neighbor ownership as one essential reason to succeed with the development of integrating RETs into the energy system. Since renewable sources and small loads are usually hard to predict, due to high variations and price fluctuations, prosumers could share information and risks commonly in these cooperative groups (Boait et al., 2017; Zhang et al., 2018). Lastly, preference satisfaction is argued to be enhanced since previous research noticed that prosumers have a lot of preferences when it comes to the environment and local communities (Silva et al., 2012). Through the integration of consumers together with more and more transparent processes, prosumers could track their energy generation, consumption, and storage, resulting in higher preference satisfaction (Boait et al., 2017).
Software platforms could be designed in various ways to facilitate P2P energy trading (Zhang et al., 2018). It is found by Brown et al. (2019) that prosumers value simplicity rather than control over the electricity system. Blockchain technology has been considered as a promising technique for the decentralized P2P energy trading markets enabling security and privacy (Siano et al., 2019; Zhang et al., 2017). With the increasing number of prosumers managing DERs, complexity and risks with transactions will rise correspondingly (Mortier, 2019; Sousa et al., 2019), where blockchain is argued being a secure solution providing smart contracts and a billing system for online platforms (Zhang et al., 2017; Siano et al., 2019). Implementing blockchain technology into P2P trading solutions could
also be identified among several actors. Thanks to a flexible monitoring and control system, data can be managed without third-party interference (Sousa et al., 2019). Despite the advantages that follow the blockchain solution and the attention that it has brought to it, the authors point out that P2P markets can exist without this particular technology.
Theoretical Framework
Multi-level Perspective on Energy Transitions
The MLP developed by Geels (2002) has been an important framework among transition-scholars (Geels, 2012; Verbong and Geels, 2007), used as an analytic tool in order to understand the dynamics of large-scale transitions in its socio-technical context, see Figure 5. Hence, the MLP framework has high relevance in this type of studies on energy system transition as it provides a useful approach to map out the shifts and tensions between new and incumbent actors as well as innovations that drive shifts of new technological systems (Wainstein and Bumpus, 2016). Transitions make up multiple developments that interact on three different analytical levels resulting in non-linear processes, consisting of following, starting at the bottom of the hierarchy (Geels, 2012): niches, socio-technical regime, and socio-technical landscape.
FIGURE 5. MULTI-LEVEL PERSPECTIVE ON TRANSITIONS (GEELS, 2012)
Previous research has shown that for a transition to be in place, there is a need to integrate and reinforce all three levels (Verbong and Geels, 2007). Niches could be explained as protected spaces where innovations, crucial for transitions and systemic change, are supported and emerged (Markard et al., 2012). Actors aim to eventually get their novelties into the regime or even replace it.
Succeeding is, however, obstructed by the existing regime that is stabilized by multiple lock-in mechanisms and path dependence (Geels, 2012). This particular research area could be considered currently exploring at a niche innovation level, where digital platforms enabling energy trading on a decentralized level strives to enter the highly stable trajectory of the centralized energy market, making up the socio-technical regime. Further, Wainstein and Bumpus (2016) argue that the incumbent energy regime is challenged by clean energy technologies and energy-saving practices.
Socio-technical systems are constructed by elements such as existing technologies, regulations, patterns made by users, infrastructures and cultural dimensions that can be changed by social groups and actors (Geels, 2012; Wainstein and Bumpus, 2016). Further, these actors are enclosed in a regime that refers to the meso-level, formed by deep-structural rules that steer and coordinate the perceptions and actions. This level of the MLP is of central interest since transitions are defined as the shifts from one regime to another (Wainstein and Bumpus, 2016). In this context, changes occur somewhat predictable in a specific direction that can establish stable trajectories. Further innovations are dominantly incremental rather than radical due to path dependence and lock-in (Geels, 2012; Markard et al., 2012). However, external pressure on the regime, originating from the macro-level consisting of the socio-technical landscape could allow for diffusion of innovations and give rise to new corporate actors (Wainstein and Bumpus, 2016). The socio-technical landscape level of MLP influences the dynamics of the two underlying layers in a degree away from individuals to control.
External landscape developments include ideologies within politics, trends within the macro- economic field, societal values, beliefs, concerns as well as media landscape (Geels, 2012; Geels 2007).
The MLP framework has particularly been applied to ‘green’ innovations but faces criticism regarding insufficient attention to aspects such as power and politics as well as regimes and incumbents which are important dimensions of the framework (Geels, 2014). Smith et al. (2005) further emphasize this, arguing that the MLP understates the role of agency in transition, and criticizes it being too formal and detailed. Despite the given critique, several authors emphasize a key characteristic of the MLP being the straightforward approach of structuring and facilitating analysis of complex large-scale transformations (Smith et al., 2010). To further characterize the energy transition through the MLP interactions, Wainstein and Bumpus (2016) suggest the adoption of BM theory given the impact niche actors have on disrupting regimes.
Business Model Canvas for Multi-sided Platforms
Wainstein and Bumpus (2016) shed light on the usefulness and importance of BM analysis in future power system transition research. The usefulness is additionally highlighted by Huijben and Verbong (2013), arguing that BMs are key drivers when introducing new technologies to the market, such as new technology solutions within the energy sector. However, the authors further express concerns regarding the experimental and learning context that innovative BMs have to operate in due to rapidly shifting conditions which cannot be fully predicted. MSPs have evolved as a way to enable direct interactions between multiple parties that become affiliated with the platform (Hagiu and Wright, 2015). Yablonsky (2018) further emphasizes this type of platforms to extend mutual benefit through allowing partners, providers and customers to create a community for sharing and enhancing digital processes and capabilities. The platform provides the infrastructure for these interactions, where the paper by Solita (2020) highlights the need of simplified value creation for all segments, including simple and seamless synergy. An additional phenomenon of MSPs, called the network effect, is that it grows in value with the number of new users it attracts which can be seen as a same-side effect or cross-sided effect (Osterwalder et al., 2010; Stummer et al., 2018). A common challenge connected to this that may be decisive for early-stage MSPs’ success is the chicken-and-egg- dilemma (Muzellec et al., 2015; Osterwalder et al., 2010; Stummer et al., 2018). This refers to the challenge of creating platform growth through making sellers want to connect with buyers through the platform with an attractive number of buyers, while only an attractive number of sellers will connect the critical number of buyers (Stummer et al., 2018).
Osterwalder et al. (2010) describe how BMC could be adapted to multi-sided businesses, making the concepts comparable, understandable, and applicable, see Figure 6.
FIGURE 6. MULTI-SIDED PLATFORM BMC DEVELOPED BY THE AUTHORS BASED ON OSTERWALDER ET EL. (2010)
The BM characteristics of MSPs are based on them having two or more customer segments leading up to a value proposition needed to be adapted accordingly to produce revenue streams of each segment (Osterwalder et al., 2010). All users are affiliated to the platform through shared technologies and interfaces, including both software, hardware, and networks (Kenney and Zysman, 2016). Corresponding to the main components of the platform architecture, containing interactions from data producers, data ingestion, data storage, etc., where the platform itself is considered the key resource (Solita, 2020). The key activities that follow are commonly platform management, service provisioning, and platform promotion (Osterwalder et al., 2010). Further, according to the authors the value proposition is usually based on three common value creations: 1) attracting users, 2) matchmaking of user segments, 3) channeling transactions to reduce costs. Common cost structures that platforms have to deal with is maintaining and developing the platform. Even more importantly, MSP businesses need to handle its revenue streams and decide on which segment is the most price sensitive and if it is possible to use revenue flow subsidy from other sides as an approach to avoid the chicken-and-egg dilemma (Osterwalder et al., 2010; Stummer et al., 2018). Using subsidizing in a platform strategy can help attract the money-side of the MSP that is charged for its participation, through having the users on the subsidy-side have discounts or even free of charge access to the platform (Stummer et al., 2018).
