Utilities' business models for renewable energy: A review

The transformation of today's electric power sector to a more sustainable energy production based on renewable energies will change the structure of the industry. Consequently, utilities as the major stake-holders in this transformation will face new challenges in their way of doing business. They will have to adapt their business models to remain competitive in the new energy landscape. The present review of business model literature shows that two basic choices exist: utility-side business models and customer-side business models. The two approaches follow a very different logic of value creation. While the former is based on a small number of large projects, the latter is based on a large number of small projects. The article reveals that blueprints for utility-side business models are available, whereas customer-side business models are in an early stage of development. Applying the business model framework as an analytical tool, it is found that existing utility-side business models comprise a series of advantages for utilities in terms of revenue potential and risk avoidance. This study provides new insights about why utilities will favor utility-side business models over customer-side business models and why they also should engage in customer-side business models in their quest for more sustainable future business models. (C) 2012 Elsevier Ltd. All rights reserved.