How Novel Business Models for Decentralised Renewable Energy Generation Transform the German Energy System: A Multi-Level Perspective

Abstract: In order to mitigate climate change, human activity needs to be decarbonised through a phase-out of fossil fuels, replaced by renewable energy sources. Here, sustainable business models can play an important role through connecting niche renewable technologies to the wider system and thereby allowing them to diffuse. Alternative business models towards the traditional centralised utility model have emerged, but remain poorly developed, and understood, especially their impact on transition dynamics over time. Therefore, this study combines business model research with the multi-level perspective on socio-technical transitions, in order to investigate how emerging sustainable business models in Germany co-evolve with the country’s energy system over time. The three studied business models are tenant electricity, community microgrid and virtual power plant. To this end, the study applied a qualitative research approach, involving an interview, survey and document review in order assess with which transition pathways, based on the multi-level perspective, the three studied business models share most characteristics with. The results suggest that community microgrid currently follows a substitution pathway, in which old regime structures are replaced over time. The business model of tenant electricity is still stuck in its niche, but under adjusting regulatory structures expected to follow a transformative pathway with minor regime adjustments, while the basic regime architecture remains unchanged. Lastly, virtual power plants as a symbiotic business model shares most characteristics with a reconfiguration pathway, in which it triggers internal change and over time can result in major structural reconfigurations. These results underline that not only the type of employed technology plays a crucial role, but also how it is made available to society in form of business models. Further, the alignment with different transitional pathways provides a more nuanced perspective on how different business model types co-relate and impact transition dynamics and thereby provides a basis for future discussions around how a sustainable energy transition can be steered towards a more democratic and inclusive energy system.