Business Model Design for Digital Energy Trading Platforms : An Exploratory Study of Local Energy Market Designs

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.