Governments and energy sector innovation: it’s all about the business model

Published: Wed 10 Feb 2016
A blog entry by Scott Bryant

Contributed by:

Scott Bryant
Analyst
Delta Energy & Environment

Scott Bryant's Blog

When it comes to the energy sector, or industry in general, government and innovation are two words not often associated with one another in Europe. Regulations, security and a business as usual approach are what springs to the mind when thinking of departments of energy the world over. However, it appears that this is beginning to change, with innovation starting to rise up some governments’ check-lists.

Consulting your way to innovationBusiness Model Canvas

This is no more apparent than in the case of the UK Government. As part of its ‘Productivity Plan’, the UK Government requires its Department of Energy and Climate Change (DECC) to develop an ‘Innovation Plan’. The idea is for DECC to develop a plan, by Spring 2016, to adapt its legislation and enforcement frameworks to enable innovation in the energy sector. More specifically, innovation through emerging technologies and disruptive business models.

In an attempt to ensure a wide-reach and range of inputs, DECC has put forth a public consultation request for general views on this topic, and to answer three key questions:

-          How can legislation and enforcement frameworks help support new technologies and business models to encourage growth?

-          How is new technology likely to shape the energy sector?

-          How can regulators better utilise new technologies to generate efficiency savings and reduce burdens on business?

However, the key focus appears to be on a new technology fix. In our view this is the easy part. Business models are the hard part.

Business models at the bottom line

We at Delta Energy & Environment believe that a focus on technology alone will only get us so far. In a market and industry designed for centralised generation with passive customers, disruptive technology can struggle to get a foothold. A focus on truly innovative business models is necessary if governments are to facilitate a transition to a more distributed, customer centric energy future, and secure the policy benefits that arise from this. As part of our Energy Services Innovation project, Delta-ee investigated 36 innovators from around the globe who are rolling out disruptive energy services models that help to improve energy on the customer-side of the meter, whilst also reducing carbon emissions. These firms are driven by innovative business models, with only 2 of the 36 innovations representing pure new technology plays. Our analysis led us to identify 11 key themes that could transform the UK and wider-European energy services sector.

However, there is a risk, based on what we’ve seen first-hand around Europe, that governments and regulators will be left behind as innovators forge ahead with any combination of these innovative energy services business models, picking at parts of the value chain they’re able to access. This will lead to sub-optimal solutions and missed opportunities.

The key question for governments is how can they facilitate innovation in business models, not just in new technology, to help meet their energy policy objectives. The inspiring examples we identified and investigated in our project are just the first step on the road to an energy sector innovation plan.

To find out more about innovative business models, visit our Energy Services Innovation page, or join the discussion and get involved via our LinkedIn Group ‘Delta-ee Energy Services Innovation Group’. Alternatively, just shoot me an email at scott.bryant@delta-ee.com.