The energy business system: transformation, social innovation & disruptive smart grid business models

A radical shift from a high- to a low-carbon energy system is not occurring at the speed required to address climate change. One reason for this, is that conventional energy firms are locked into producing shareholder profit with fossil-intensive business models that are still operable in current markets. This PhD thesis employs systems thinking to analyse lock-in of the energy business system (EBS) and then adopts design thinking to propose disruptive innovations that can accelerate low-carbon transitions. Dynamics of the EBS transition are evaluated in an interdisciplinary way and across systems scales, from the Earth system to the distribution edge of the electrical power system. Conceptual frameworks that combine complex system and transition theory are developed to evaluate the global EBS in an Earth system context and to analyse the role of business models in the decarbonisation of the electricity sector. Previous research suggests that strategies for escaping EBS lock-in include incorporation of environmental liability to shareholders, carbon taxation and other economic measurements to alter market conditions. The systems analysis presented here suggests that to ensure environmental resilience the EBS’s fundamental purpose and governance need revision. I theorise that more social innovation in business models could influence business trajectory in the energy sector. Instead of maximising shareholder profit, social innovations can shift business purpose towards long-term social and environmental value-creation using emerging market-based tools. A business model analysis of the electricity sector is used to identify opportunities for EBS disruption from social innovations. I find that, in general, social and environmentally driven low-carbon projects often struggle to achieve scale and commercial advantage. However, recent business model innovations in smart grids can provide such projects with the required competitive position. Specifically, Virtual Power Plant technology has emerged as an energy management system that allows aggregation and coordination of multiple distributed energy resources. Aggregation can include diverse resources such as photovoltaics, batteries, electric vehicles and windfarms. Coordination can achieve improved physical and market performance as a functional unit within the electricity market. Using theoretical model development and illustrative examples, I highlight how emerging opportunities such as peer-to-peer Internet platforms and blockchain technology, also have significant potential as tools to enable disruptive business models, through decentralised value creation using assets from online participants. Building from the systems thinking analysis of the EBS lock-in, the second part of this PhD thesis uses design thinking to propose and further develop a new business model termed a ‘social virtual energy network’ (SVEN). As an urban social electricity-trading network, a SVEN is designed to help accelerate the decarbonisation of the power system and influence paradigm shifts in EBS governance. Two iterations in the design of the SVEN concept are presented and critiqued based on insights derived from the first part of the thesis. The first iteration focuses on the role of virtual power plants and tariff design for business feasibility, and the second on blockchain and user interfaces for mainstream market adoption. Through systems analysis, this study argues that an adequate response to climate change requires a paradigm shift in the EBS. Using a systems design approach, the thesis provides a vision for the architecture of a democratic open energy economy where users and their distributed energy resources have an active role in the value chain of the EBS. The findings and proposals of this work are relevant to debates about the most effective ways of accelerating targeted innovations to achieve a low-carbon energy system.

Author dc:creator

• Wainstein, Martin Enrique

• energy transition
• climate change
• business models
• innovation
• smart grids
• Earth system resilience

Statement dc:rights

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Handle dc:identifier.uri

http://hdl.handle.net/11343/220727

OAI identifier oai:identifier

oai:jupiter.its.unimelb.edu.au:11343/220727