Welcome back to our 5-part blog series on Business Model Innovation. Cheaper, mature storage technology is creating the need for business model innovation at all levels of electricity supply. In today's post, we look at behind-the-meter energy storage business model innovation. The supply side has increasingly more assets behind-the-meter, creating large flexibility needs. Similarly, the reduced costs of storage allow more storage assets behind-the-meter offering flexibility sources.
Broad and numerous as the behind-the-meter storage systems are, so varied are the business model innovations that make them profitable. Our discussion shall cover:
- Consumer-owned assets not capturing market value
- Consumer-owned assets capturing market value through aggregators
- Distributors’ own storage assets for network services
- Storage as a service; third party owned assets capturing market value.
When consumers own the assets but are not capturing market value, their main motivation is to optimise their electricity bill, for both network and energy charges. Depending on locally applied grid tariffs and potential arbitrage revenues, the revenues from storage could globally recover the costs of the system. The consumer can be assisted by a third party of the day-to-day operation optimisation.
Through aggregators, consumers that own the storage assets can capture the market value. In addition to optimising the electricity bill, the consumer has a contractual agreement to increase the arbitrage revenues. The aggregator takes market operation responsibilities. This model strongly depends on a suitable aggregator which can bid on the market.
Distributors can own storage assets for network services, on the consumer's premises. The storage systems is an embedded device of the distribution network, and are eligible for cost recovery through regulated revenues. In some cases, consumers can also benefit from the storage system through its retail tariffs. Contrary to the previous cases, the distributor is in control of the distributed storage devices.
Finally, storage-as-a-service is when a third party owns the storage assets and captures the market value. The end consumers see no upfront costs and only a share of the savings. The third-party seeks to optimise the consumer’s electricity bill, for both network charges and energy charges and can act as an aggregator to increase revenue streams.
Of the four discussed models, storage-as-a-service is therefore expected to become the most attractive business model from the consumer point of view. This is because consumers can benefit from storage services. They are not required to gain the expertise to manage and control the storage assets and they do not have to endure any upfront cost.
Join us again next week when we look at off-grid energy storage business models.
What can you do now?
Digital transformation is radically disrupting the energy industry. Business models need to adapt to keep pace with change. But as we move from products to services, from bricks and mortar to platforms, and with decentralisation changing the playing field, how do you stay up to speed with changing regulation? How do you ensure you’re truly optimising the opportunities?
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