UKERC EDC: Publications

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Abstract:

This project studied how value can be delivered across a smart energy value chain - in the context of the UK. It built a clear understanding of how smart energy systems can deliver combined consumer value alongside commercial value for market participants - producers, suppliers, distributors. The analysis will help to make the commercial deployment of smart energy systems more likely. This £600,000 project was delivered by Frontier Economics, a leading economic consultancy.

The final report has 11 annexes. This is Annex 3d: Elements of business model offerings

In this work, we have considered how business models may be able to overcome barriers to the uptake of low-carbon heating interventions. Business model providers offering such interventionsmay be able to incorporate various additional elements (for example, contracts that reduce risks) to make the overall proposition more attractive for consumers.However, consumers may also be able to obtain these types of service alongside incumbent technologies such as gas boilers.

In this annexe, we explore the extent to which various business model elements can enable low-carbon interventions to be more competitive.

Overall, the analysis in this section suggests that many barriers to smart systems and heat intervention take-up can be mitigated through an “outcomes provider” business model, which combines elements such as risk reduction, access to finance, and access to information. These will tend to increase the attractiveness of low-carbon interventions relative to the alternative of keeping heating incumbent technologies and avoiding retrofits.Two business model elements in particular may improve the proposition provided by heat pumps compared to gas boilers.

Providing fixed-bill contracts
Using heat pumps and HEMS to provide DSR servicesto entities such as suppliers, DNOs, and National Grid.

However, it is far from certain how effective such business models would be. The costs and benefits of fixed-bill contracts are difficult to quantify (they depend on consumer behaviour in the presence of uncertainty, which as explained in annex 3a, does not lend itself to bottom-up modelling). The gains from DSR to a household might be less than £50 per year,which seems small in the context of the wider barriers to take-up. Finally, these contracts do not address the barriers to insulation take-up even though (as discussed in the main report), this is likely to be a significant problem for many households.

This document was prepared at the time to contribute to ETI internal thinking and planning only.

Publication Year:

2015

Publisher:

ETI

DOI:

https://doi.org/10.5286/ukerc.edc.000505

Author(s):

Frontier Economics

Energy Categories

Class Name:

Subclass Name:

Category Name:

Energy Efficiency

Residential and commercial

Other Cross-Cutting Technologies or Research

Other Supporting Data

Language:

English

File Type:

application/pdf

File Size:

451521 B

Rights:

Energy Technologies Institute Open Licence for Materials

Rights Overview:

The Energy Technologies Institute is making this document available to use under the Energy Technologies Institute Open Licence for Materials. Please refer to the Energy Technologies Institute website for the terms and conditions of this licence. The Information is licensed "as is" and the Energy Technologies Institute excludes all representations, warranties, obligations and liabilities in relation to the Information to the maximum extent permitted by law. The Energy Technologies Institute is not liable for any errors or omissions in the Information and shall not be liable for any loss, injury or damage of any kind caused by its use. This exclusion of liability includes, but is not limited to, any direct, indirect, special, incidental, consequential, punitive, or exemplary damages in each case such as loss of revenue, data, anticipated profits, and lost business. The Energy Technologies Institute does not guarantee the continued supply of the Information. Notwithstanding any statement to the contrary contained on the face of this document, the Energy Technologies Institute confirms that it has the right to publish this document.

Further information:

N/A

Region:

United Kingdom

Publication Type:

Technical Report

Subject:

Buildings

Theme(s):

Smart Systems and Heat

Related Dataset(s):

List of projects for the ETI Smart Systems and Heat (SSH) Programme