Sustainable electricity supply in a decentralised market: an analysis of business models, operators and regulation

Abstract

The research work is focused on the analysis of decentralised and sustainable business models for electricity supply and on the main drivers and barriers for the establishment of a low-carbon energy system. The traditional scheme, characterized by the volume-based provision of energy generated by large centralised plants with limited customer engagement and standardized contracts, has proved outdated. On the other side, the economic advantage of Distributed Generation (DG) is now unquestionable: the cost of clean power technologies is decreasing, customers are gradually becoming more familiar with on-site generation and with demand management and Distribution and Transmission System Operators are adopting innovative strategies to accommodate Decentralised Energy Resources (DER). However, it is not yet clear how the process of supplying decentralised electricity will be implemented. The first paper, entitled “Innovative and sustainable business models for efficient electricity supply”, was presented at the 4th European Conference on Behaviour and Energy Efficiency in Coimbra (8-9 September 2016) and was submitted to Ecological Economics. The study adopts an analytical framework that integrates co-evolutionary theory and business model theory to provide a detailed analysis of innovative and sustainable schemes currently available in the Italian market; an overview of the evolving strategies and role of market operators in a decentralised system is also given. The analysis of the main aspects which enabled the development of a specific business model aimed to large industrial consumers is the core of the second paper, “Regulatory and market framework for innovative and sustainable electricity supply: the case of Integrated Energy Services”, submitted to Utilities Policy. The study examines in depth the main characteristics of Integrated Energy Services business model, under which Enel Energia installs a CHP/CCHP power plant on the premises of the industrial customer and captures revenues by selling electricity and heat through a Take-or-Pay contract for 6-7 years. This contribution includes a cross-country analysis to verify whether the conditions for the implementation of similar schemes are available in other European markets (UK and Spain). The third paper, submitted to Renewable and Sustainable Energy Reviews, is entitled “The regulation for Distributed Energy Resources in the Italian electricity market: a driver for innovation?”. It focuses on the role of regulation as a driver for innovation in the power sector: through the assessment of the Italian governance and of significant Italian policies, it reflects on the instruments that allow the full integration of DER and the creation of a distributed grid control system across Europe. The research work as a whole provides insights on transition pathways towards decentralised energy system across Europe, with a focus on Italy: the wider propagation of DER will require dramatic changes both from the side of governments (in terms of policy and regulatory innovation) and entrepreneurs (in terms of business model innovation), to find instruments that allow suppliers, users and network operators to adopt sustainable strategies and innovative technologies across Europe.