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

DEGREE PROJECT IN THE FIELD OF TECHNOLOGY DESIGN AND PRODUCT REALISATION AND THE MAIN FIELD OF STUDY INDUSTRIAL MANAGEMENT, SECOND CYCLE, 30 CREDITS STOCKHOLM, SWEDEN 2020

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

ISABELLE GRANATH

KRISTIN HOLMLUND

KTH ROYAL INSTITUTE OF TECHNOLOGY SCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT

Business Model Design for Digital Energy Trading Platforms

An Exploratory Study of Local Energy Market Designs

Isabelle Granath & Kristin Holmlund

2020-05-27

Master of Science Thesis TRITA-ITM-EX 2020:208 KTH Industrial Engineering and Management Industrial Management SE-100 44 STOCKHOLM

Affärsmodeller för digitala energidelningsplattformar

En utforskande studie av lokala energimarknader

Isabelle Granath & Kristin Holmlund

2020-05-27

Examensarbete TRITA-ITM-EX 2020:208 KTH Industriell teknik och management Industriell ekonomi och organisation SE-100 44 STOCKHOLM

Master of Science Thesis TRITA-ITM-EX 2020:208

Business Model Design for Digital Energy Trading Platforms

Isabelle Granath Kristin Holmlund Approved Examiner Supervisor 2020-06-08 Cali Nuur Frauke Urban Commissioner Contact person Power2U Arshad Salem 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.

Keywords: Local Energy Markets, Flexibility, Prosumers, Market Design, Multi-Sided Platform, Distributed Energy Resources, Aggregator, Business Model, Multi-Level Perspective

Examensarbete TRITA-ITM-EX 2020:208

Affärsmodeller för digitala energidelningsplattformar

Isabelle Granath Kristin Holmlund Godkänt Examinator Handledare 2020-06-08 Cali Nuur Frauke Urban Uppdragsgivare Kontaktsperson Power2U Arshad Salem Sammanfattning

Den traditionella elmarknaden, karaktäriserad av en centraliserad styrning, är inte längre hållbar då utvecklingen av marknaden går mot ett allt mer elektrifierat, decentraliserat och digitaliserat samhälle. Ökande energipriser, växande oro för klimatfrågor tillsammans med en allt snävare reglering av energimarknaden har resulterat i en omfattande ökning av förnybara energikällor. Denna utveckling förväntas förändra sektorns struktur, där en lämplig marknadsdesign som kan hantera detta återstår att identifiera. Syftet med denna studie var att undersöka hur en affärsmodell för en digital plattform, anpassad för att hantera lokal energidelning, kan utformas. Denna studie bidrar till en ny dimension av energitransformationen från ett multi-nivå-perspektiv genom att studera ett särskilt område av övergången i form av flexibla marknadsplattformar. Det ökande behovet av flexibla lösningar, där konsumenter blir prosumenter och energi delas lokalt via digitala plattform innebär osäkerheter och utmaningar. En lämplig affärsmodell som kan anknyta de nya tekniska lösningarna som krävs till lokala energimarknader bör därav definieras. Trots att forskningsområdet som berör lokala energimarknader kan anses relativt nytt och delvis outforskat, har målet att undersöka affärsmodellkoncept för en lokal energimarknadsplattform uppnåtts genom en fallstudie och iterationer av teorier inom flertalet områden.

Denna studie bidrar med en analytisk undersökning av fem innovativa projekt som alla utvecklar digitala plattformar för att möjliggöra integrering av flexibilitet till elmarknaden. Detta bidrar även till det kunskapsgap som har identifierats mellan design och implementering fas vid utvecklandet av lokala energimarknader, genom föreslagna parameter som anses grundläggande och som bör tas hänsyn till. Baserat på resultatet presenterades ett förslag på en lämplig design för affärsmodell samt en tillhörande marknadsdesign. Huvudsyftet med den föreslagna marknadsdesignen är att utgöra en grund för gynnandet av en mer flexibel elektricitet hantering. Detta möjliggörs genom introduktionen av prosumenter till marknaden, där allt mer elektricitet produceras från förnybara källor och där konsumtion samt produktion regleras med hjälp av integrerade lagringsenheter. Målet är att upprätthålla ett balanserat och transparent distributionsnät till lägsta möjliga kostnad, medan marknaden även fungerar som ett reservlager mot kraftnätet, vilket minskar risken för kapacitetsbrist runt om i Sverige. Ytterligare insikter från denna studie påvisar hur de befintliga energitillgångarna kan utnyttjas på ett mer flexibelt och effektivt sätt, vilka stöds av de nyligen presenterade rekommendationerna från EU:s Clean Energy-paket.

Abbreviations

BM Business Model BMC Business Model Canvas BMI Business Model Innovation DSO Distribution System Operator FPP Federated Power Plant LEM Local Energy Market P2P Peer-to-Peer DER Distributed Energy Resource VRE Variable Renewable Energy RET Renewable Energy Technologies RES Renewable Energy Sources VPP Virtual Power Plant MLP Multi-level Perspective TSO Transmission System Operator

Table of Contents

1. Introduction ...... 1 Background ...... 2 Problem Statement ...... 4 Purpose ...... 4 Research Question ...... 5 Case Description ...... 5 Delimitations ...... 6 Thesis outline ...... 6

2. Literature Review & Theoretical Framework ...... 8 Business Models ...... 9 Flexible Energy Trading ...... 15 The Prosumer Era ...... 19 Multi-level Perspective on Energy Transitions ...... 22 Business Model Canvas for Multi-sided Platforms ...... 24 Business Models within the MLP ...... 26

3. Method ...... 29 Research Design ...... 30 Research Process ...... 32 Data collection ...... 33 Data analysis ...... 36 Research quality ...... 38 Ethical considerations ...... 39

4. Overview of the Current State & Future Trends ...... 40 Overview of the Swedish Electricity Market ...... 41 Trends and the Future Energy System ...... 44

5. Empirical findings ...... 46 Business Models of Applications ...... 47 Findings from Interviews ...... 54

6. Analysis and Discussion ...... 65 Business Model Canvas applied for the Energy Transition ...... 66 Market Design for Energy Trading Platforms ...... 70 Stakeholder Acceptance of a LEM Transition ...... 74 Market Design and Business Model Concept ...... 78

7. Conclusion & Managerial Implication ...... 81 Main Findings & Practical Implications ...... 82

Theoretical Contribution ...... 84 Limitations and Future Research ...... 85

References ...... 86

Appendix A ...... I

Appendix B ...... II

List of Figures

Figure 1. Business Model Canvas based on Osterwalder et al., (2010) ...... 10 Figure 2. Centralized (left) vs. decentralized (right) Power Generation System Developed by the authors ... 15 Figure 3. Categorization of Local Energy Markets (Teotia and Bhakar, 2014) ...... 17 Figure 4. Decentralized Market Models (Parag and Sovacool, 2016) ...... 19 Figure 5. Multi-level Perspective on Transitions (Geels, 2012) ...... 22 Figure 6. Multi-sided platform BMC Developed by the authors based on Osterwalder et el. (2010) ...... 24 Figure 7. Business Models as intermediates between nice and socio-technical regime (Bidmon and Knab, 2018) ...... 27 Figure 8. Triangulation of the Study ...... 31 Figure 9. Research Process ...... 32 Figure 10. Analysis Process Developed by Creswell (2014) ...... 36 Figure 11. Overview of Coding ...... 37 Figure 12. The swedish electricity grid developed by the authors ...... 41 Figure 13. Nodes Market Design (Nodes, 2020) ...... 48 Figure 14. Nodes BM, synthesized by the authors ...... 49 Figure 15. Enerchain local BM, synthesized by the authors ...... 50 Figure 16. FED Market Design (Fed, 2019) ...... 51 Figure 17. BM of FED project developed by the authors based on FED (2019) ...... 51 Figure 18. Centrica Blockchain Infographic (Centrica, 2019) ...... 52 Figure 19. Cornwall Local Energy Market bm Synthesized by the authors ...... 52 Figure 20. xGrid BM Synthesized by the authors ...... 53 Figure 21. Suggested Business Model Design ...... 78 Figure 22. LEM Connected to the Platform ...... 79 Figure 23. LEM and Conventional Grid ...... 80 Figure 24. Vital Parameters of a Market Set-up ...... 82

List of Tables

Table 1. The building blocks of the BMC developed by Osterwalder et al., (2010) ...... 10 Table 2. Specifications of interviews ...... 34 Table 3. Description of Application Cases ...... 47

Acknowledgement

This master thesis is the final imprint we make on our studies at the Royal Institute of Technology (KTH). It was conducted during a special time, seeing an outbreak of a pandemic in the beginning of the process which made us rethink our methodologic visions. However, despite the special circumstances brought by the COVID-19 pandemic that forced us all to work from distance, we express our sincere gratitude to all our collogues at Power2U, especially to Arshad Salem who have provided great support and guidance for the progress of this thesis. We are also thankful to all interview participants of this study for giving us the opportunity obtain empirical findings valuable for this study, for taking their time to share their knowledge which was beyond anything we could have found in the literature.

Special thanks also go to our supervisor at KTH, Dr. Frauke Urban as well as seminar leaders Milan Jocevski and Cali Nuur, for their constructive feedback on the paper, and not to forget, our seminar peers.

To finalize, we would like to express gratitude towards each other, as being co-authors have been more of a blast than a struggle thanks to our positive attitude, despite the times of a pandemic and late working hours. We could not have wished for a better way to finish of our degree together.

May 2020, Stockholm Isabelle and Kristin

Introduction

This chapter provides an overview of the significance and relevance of the study through a background that leads to the central research problem. Further, the purpose of the study is explained along with the preliminary research questions, case description, and delimitation of the scope of the study. 1. Introduction

Background

The world is facing an inevitable transformation pressure where change needs to happen rapidly in order to be in line with sustainable development goals and to battle one of the greatest challenges of our time, climate change (de Pádua Pieroni et al., 2018). Increased energy prices, raising concerns about climate change, and tightening governmental regulations all together drive the need for improved energy efficiency (Li et al., 2017). The EU commits to reducing greenhouse gas emissions by at least 40 percent until 2030 with an expected share of 50 percent of renewables (Olivella-Rosell et al, 2018). This urgency of phasing out fossil fuels opens up windows of opportunities for businesses, while also receiving ever-advancing support from technology (Geissdoerfer et al., 2018). Yet, companies experience challenges meeting sustainability targets. Difficulties are faced when transforming goals, objectives, and principles into concrete actions (Levi Jakšić, M., Rakićević, J. and Jovanović, M., 2018), where previous literature points out that there is a need for change within the infrastructure of energy systems. Additional pressure on the system originates from combinations of mega trends, such as urbanization and electrified transport. This may lead to peak-loads in some areas that are too large in relation to the capacity of the grid (Karlsson and Dahlgren, 2019; The Royal Swedish Academy of Engineering Sciences (IVA), 2017). A transition replacing the centralized energy system based on fossil-fuels with a renewable-based decentralized energy system is vital for a low-carbon energy future (Koirala et al., 2016). This will require integration of digital solutions into the energy system to balance and optimize demand, as well as interconnected and collaborative participants that can manage high volatility and weather-dependent electricity generation (UIA, 2019).

The traditional energy system holds authority over passive consumers and lacks transparency and competition, affecting consumer trust and prices not being determined based on supply and demand (Oh et al., 2017). Although the politics around the electricity grids have remained relatively unchanged over the last century, the emergence of smart technologies and people's increased awareness of climate change have changed the mindset of consumers, while also the opportunities to become prosumers, who both generate and consume energy, have grown stronger (Jogunola et al., 2017). These developments are seen in Europe where the European Commission recently delivered a package of proposals fostering market-based flexibility with the aim to shape the EU to fulfill the Paris Agreement, combating climate change (Energimarknadsinspektionen, 2020; Schittekatte and Meeus, 2020). The definition of flexibility used within this study is based on the one presented by Eid (2017), to be the ability to manage external signals on the energy system to balance its generation and consumption, including production, storage, and demand response.

Eid et al. (2016) highlights that an increased number of people are already switching over to renewable Distributed Energy Resources (DERs), such as solar and wind power plants for electricity generation. With the rise of combining DERs into the energy mix, prosumers can create flexible markets, namely Local Energy Market (LEM) (Zhang et al., 2017). LEMs are recognized as a tool to improve utilization of existing resources and consist of the coordination of decentralized energy supply, storage, transport, conversion, and consumption within a specific geographical area (Eid et al., 2016). Any excess energy produced can either be stored for later use or supply others, uncovering

the opportunities for Peer-to-Peer (P2P) energy trading that can increase the efficiency and flexibility of local resources (Zhang et al., 2017). A global status report made by the international policy network, Renewables Now (REN21), shows that the global average share of renewables in electricity consumption was at a level of 26 percent during 2018 (REN21, 2019). Furthermore, research states that the diffusion of Renewable Energy Sources (RES) into the grid will significantly increase to exceed 60 percent by 2050 (Siano et al., 2019).

With the increasing share of RESs, Richter (2012) expect that the structure of the energy sector needs to change which opens up opportunities for creating new business models (BMs). The author further argues that the replacement of traditional centralized production and distribution will require a disruption of current strategies. Digitalization can be exemplified as an enabler of disruption that has influenced all sectors of society and has great potential in the energy sector to provide efficiency (Karlsson and Dahlgren, 2019). The mega trend has further resulted in an emerging platform economy. The use of digital platforms has evolved and spread to various sectors, simplifying human interaction and have become at the forefront of the shift towards a shared economy (Kenney and Zysman, 2016). The advancement of digital platforms within the energy sector, along with the rise of P2P energy trading has the potential to reconfigure how people could access, sell and buy energy with more transparency and control (Kloppenburg and Boekelo, 2019). However, the centralized energy grid infrastructure with a unidirectional flow is limiting these opportunities. To be able to increase DERs, a more bottom-up approach and a reorganized infrastructure is needed to create larger involvement of local operators (International Conference on the European Energy Market et al., 2016; Koirala et al., 2016).

A well applied framework when addressing socio-technical transitions, such as the those described above, is the multi-level perspective (MLP), used to understand changes and tensions towards a sustainable pathway (Wainstein and Bumpus, 2016). BMs are considered as being key drivers when bringing new technologies, opening for a low carbon power system transition (Wainstein and Bumpus, 2016; Huijben and Verbong, 2013). The field of literature that links BMs with socio- technical transitions can enhance the understanding of the need to shift towards sustainable development (Bidmon and Knab, 2014; Huijben and Verbong, 2013; Tongur and Engwall, 2014). This thesis uses the Business Model Canvas (BMC) combined with the MLP, to address how to integrate technologies, stakeholders, and mechanisms to reach a socio-technical transition.

Problem Statement

Centralized authority over energy systems is no longer suitable seeing a change towards a more electrified, decentralized, and digitalized society (Siemens, 2019). An extensive diffusion of RESs has evolved, expected to change the structure of the sector (Richter, 2012), despite that an appropriate market design that can deal with these remains to be identified (Olivella-Rosell et al., 2018). Furthermore, policy targets of having energy production based on 100 percent renewable sources in Sweden by 2040 are closing in (IVA, 2017). The need for a more decentralized energy system is high on the agenda of reaching the targets for the transition from fossil fuels to a renewable-based energy system (Koirala et al., 2016). The inconstancy connected with weather-dependent electricity generation requires great responsibility of all players to cooperate and interact (Karlsson and Dahlgren, 2019). However, new market actors, pushing incumbents for both a technological and societal shift involves tensions (Bryant et al., 2018; Wainstein and Bumpus, 2016). Utilities having dominating positions in the electricity sector will be confronted with disruptions of their current ways of doing business and face challenges following the development and stay competitive in the new market (Richter, 2012).

Further, digital platforms are emerging in many types of industries while implementation within the sector for energy trading into small local markets is yet unexplored (Zhang et al., 2017). This is further highlighted by Koirala et al. (2016), emphasizing that a more bottom-up solution would increase global welfare and capture advantages, yet, there is a gap of extensive evaluation in the case of implementation. The energy sector is usually conceptualized as a socio-technical system, including a variety of interrelated components resulting in a high level of complexity (Markard et al., 2012). One aspect that has not played a significant role in the current market is an active customer interface management. Nevertheless, it is considered as being an essential element in the new market due to changed value propositions and increased consumer awareness (Richter, 2012). The rising need for flexible solutions making the consumer a prosumer, enabling shared energy through a digital platform involves uncertainty and challenges where a suitable BM, linking new technology to the emerging market, needs to be defined (Kavadias et al., 2016).

Purpose

The purpose of this study is to investigate how the business model of a digital platform managing energy trading within a local community could be designed.

Research Question

The following research question was defined to address the purpose of the study.

RQ: What business model design is suitable for a digital platform enabling Local Energy Markets?

Whereas relevant sub-questions were defined to address the main research question.

SQ1: How can business model theories be transformed to successfully implement digital platforms in practice? SQ2: What market design could be suitable for a commercialized digital platform offering Energy Trading? SQ3: What role do stakeholders play in enabling Local Energy Markets?

Case Description

The practical implication of this thesis intends to be applicable to the case described below, given by the company in which this study is performed in collaboration with. This particular case was selected based on being a project currently in the development phase, considered as having the potential of integrating flexibility into the infrastructure. The case was further used as a basis to determine the scope of this thesis.

1.5.1. TAMARINDEN In 2016, a detailed development plan for a new residential area in the municipality of Örebro was approved, based on a future-proofed energy system (Örebro Kommun, 2019).. The area, characterized by innovative and sustainable technology solutions, creates conditions to reduce, produce, store, and share energy. The project, named Tamarinden, is planned to consist of 15 buildings with approximately 660 apartments. In comparison to a traditional residential area, all buildings will be connected to a local energy grid, managed by an electronic control unit. Residents will not have any electricity subscription with suppliers, instead charged for the electricity consumption via sub-measurements.

The project encourages the use of locally generated electricity and circular energy consumption, which will be enabled through installed solar cells on parts of the building. Additionally, storage in terms of batteries enables the transmission of excess energy to other buildings or traded to a nearby surrounding network, all facilitating a self-sufficient community.

Delimitations

Certain chosen delimitations will frame this scope of this study in regard to the thesis being based on a company-specific problem. The central field of this study lies within “energy trading,” a term used throughout the study. Still, the focus will be put almost exclusively on the application of electricity trading and actors of the electricity value chain, meaning that separate components of the energy sector, such as heat, oil, or gas, will not be taken into account. Further, considerations of existing regulations will be excluded from the practical implications of this project but will be raised in discussions and analysis. The scope of study will not be limited to a specific geographical area, yet, interviews with experts working on the case company as well as other global companies will be conducted in Sweden. Meaning that the study will mainly be relevant for companies within Northern Europe exploring similar opportunities.

Thesis outline

Chapter 1 – Instruction: This chapter provides an overview of the significance and relevance of the study through a background that leads to the central research problem. Further, the purpose of the study is explained along with the preliminary research questions, case description, and delimitation of the scope of the study.

Chapter 2 – Literature review & Theoretical Framework: This chapter provides a review of the literature comprising the areas: business models, energy trading and the prosumer era. Understanding large-scale transitions to new ways of sharing energy requires analytical frameworks enabling a comprehensive overview of multiple approaches and interrelations between different actors and elements. This chapter also presents the main theories and frameworks which make out the base for the research. It provides elaboration of the Osterwalder et al., (2010) Business Model Canvas and Geels’ (2002) Multi-level perspective and the integration of the two frameworks on how business dynamics intersect with socio-technical transitions.

Chapter 3 – Methodology: This chapter describes the research design of the study followed by a summary of the research process. Further, the methods used for data collection of the pilot study and empirical investigation are presented followed by the methodology behind the data analysis. Lastly, the research quality in terms of validity and reliability is layered-out for and the ethical consideration explained.

Chapter 4 – Overview of the Current State & Future trends: This chapter provides an overview of the current Swedish Electricity Market, introducing main stakeholders along with their areas of responsibility. It also provides an overview of current laws and directives that regulate the market. Lastly, the chapter highlights emerging trends and advancement in energy-related technologies.

Chapter 5 – Empirical Findings: The following chapter sets out to present the qualitative findings from the empirical study of existing applications of energy trading platforms where each application is synthesized into a BMC. The second part of the chapter outlines the main highlights from the interviews. The presented results will make out the base for the analysis and discussions.

Chapter 6 – Analysis & Discussion: The inter-disciplinary interviews with a wide range of areas of expertise captured various perspectives of the development of LEMs and platforms. These will be analyzed and discussed in this chapter in relation to the literature based on the theoretical framework of this study aiming to address the research questions. Firstly, the findings will be analyzed towards implications of developing a business model design. Secondly, implementation of an energy trading platform will be discussed in regard to market design and input from respondents. Lastly, the aspect of willingness will be outlined in terms of the LEM as a part of the energy transition which will make out the base of a stakeholder analysis and mapping.

Chapter 7 – Conclusion & Practical Implications: This chapter raises the main implications from the analysis and discussion to provide an answer to the main research question.

Literature Review & Theoretical Framework

This chapter provides a review of the literature comprising the areas: business models, energy trading and the prosumer era. Understanding large-scale transitions to new ways of sharing energy requires analytical frameworks enabling a comprehensive overview of multiple approaches and interrelations between different actors and elements. This chapter also presents the main theories and frameworks which make out the base for the research. It provides elaboration of the Osterwalder et al., (2010) Business Model Canvas and Geels’ (2002) Multi-level perspective and the integration of the two frameworks on how business dynamics intersect with socio-technical transitions.

2. Literature Review & Theoretical Framework

Business Models

As a result of the e-commerce boom of the 1990s, the last two decades have seen increased popularity for the concept of a BM (Geissdoerfer et al., 2018; Nosratabadi et al., 2019). This momentum was gained thanks to its simplicity of communicating complex business ideas to potential investors (Geissdoerfer et al., 2018). It has ever since then become a rapidly evolving field (Osterwalder et al., 2010), but there is no generally recognized definition of BMs (Richter, 2012). However, through a review of the literature, the most central components of the BM concept that are raised by several authors can be synthesized to the abstract representation of the value proposition, how value is created, captured and delivered (Geissdoerfer et al., 2018; Osterwalder et al., 2010; Richardson, 2008; Zott et al., 2011), which is the definition used within this paper. Basically, BMs make out the architecture consisting of the activities required of organizations to deliver its value proposition, including the internal infrastructure, customer interface, and pricing mechanisms (Richter, 2012).

It has been identified by Richter (2012) that scholars agree that a BM serves as a tool for analysis and management in research and practice, being especially relevant for industries enduring fundamental transformations. Contributions have been made by several authors to propose frameworks supporting the development of BMs for instance by Osterwalder et al., (2010); Richardson (2008); Joyce and Paquin (2016); Teece (2018); Zott and Amit (2010). The motivations behind this can be traced to the effectiveness of BMs to represent planning, communication, as well as the facilitated implementation of complex organizational business ideas. The BMC developed by Osterwalder et al. (2010) is an especially well-known and practiced framework. It is based on design science methods and theory providing guidance to illustrate the business architecture to guide the creative phase of prototyping, collecting feedback, and improving iterations on innovating BMs (Joyce and Paquin, 2016).

2.1.1. THE BUSINESS MODEL CANVAS A tool for describing, analyzing, and designing BMs has been developed by Osterwalder et al., (2010) referred to as the BMC. The definition of BM from which BMC has its roots is "the rationale of how an organization creates, delivers and captures value" (Osterwalder et al., 2010). The tool is suggested to be a contribution to the field of BMs in the way it creates a shared language that allows organizations to develop a blueprint-like BM for strategy implementation. The BMC is a preformatted chart that visualizes the nine building blocks proposed by Osterwalder et al., (2010), see Figure 1, and description of each block in Table 1, to form the basis for a helpful tool to describe, visualize, and to assess internal functions or competitors or any enterprise. These represent the logic of how a company intends to form activities to create, capture and deliver value.

FIGURE 1. BUSINESS MODEL CANVAS BASED ON OSTERWALDER ET AL., (2010)

TABLE 1. THE BUILDING BLOCKS OF THE BMC DEVELOPED BY OSTERWALDER ET AL., (2010)

2.1.2. BUSINESS MODEL INNOVATION FOR SUSTAINABILITY Furthermore, the concept of business model innovation (BMI) has gotten a lot of emerging attention in the literature. Osterwalder et al., (2010) describes it as the replacement of outdated models through value-creation for businesses, customers and society. The research of the topic has expanded to cover broad application areas, mainly corporate diversifications, business venturing, and start-up contexts with the focus on BMI (Geissdoerfer et al., 2018). The authors further express BMI as either the design of new models for start-up contexts, the transformation of existing BMs or diversification and the acquisition of additional BMs. This thesis will focus on highlighting literature on BMI synthesized from the aspect of creating novel businesses, seeing an inevitable future of an industrial transformation of the energy sector.

Despite the benefits of BMI, Joyce and Paquin (2016) highlight that the focus on business thinking historically has failed to integrate a natural sciences-based notion of environmental limits of our planetary boundaries. Sustainability issues, in terms of environmental impact have only been observed from a distance and not adequately become addressed by companies, taking responsibility for its impact through reducing resource and energy use (Joyce and Paquin, 2016).

With the emerging pressure on businesses to react to sustainability concerns, such as the UN’s sustainable development goals, a field of sustainable BMs has developed, which has rapidly gained academic and practitioner interest (Geissdoerfer et al., 2018, Joyce and Paquin, 2016). Sustainable BMs describe how organizations could sustainably create value while satisfying goals regarding the economy, environment, and society (Geissdoerfer et al., 2018). This study mainly focuses on environmental aspects of sustainability. Current research reviews (Geissdoerfer et al., 2018; Nosratabadi et al., 2019) describe the main reasons for the evolved field of sustainable BMs and emphasizes the benefits it will imply. Further, it is recognized that the research field of sustainable BMs is becoming more widespread among several industries and divisions due to external forces and urges from international and governmental organizations (Nosratabadi et al., 2019). These challenges arising with the urgency to respond to the sustainable responsibilities of organizations also open up opportunities to innovate for sustainability-oriented engagement (Joyce and Paquin, 2016). Wainstein and Bumpus (2016) further raise BMs ability to alone serve as sustainable innovations if properly considered in the processes of value proposition, creation, and capture. Geissdoefer et al. (2018) and Nosratabadi et al. (2019) argue that companies gain a competitive advantage and critical leverage to improve sustainability performance. However, Bocken et al. (2014) counters this through highlighting a key challenge of BM design to capture economic value for the companies themselves while delivering social and environmental benefits. Authors have further identified a design- implementation gap of sustainable BMI (Geissdoerfer et al., 2018; Nosratabadi et al., 2019). Geissdoerfer et al. (2018) and Geissdoerfer et al. (2016) further raise the concern of the low number of tools available for guidance to companies.

2.1.3. ENERGY SECTOR TRANSFORMATION DEPENDING ON DIGITAL REVOLUTION AND TECHNOLOGICAL EVOLUTION Looking especially at the energy sector, Richter (2012) signifies BM transformation as vital for incumbents currently being faced with an inevitable energy transition to low-carbon sources. A similar argument by Wainstein and Bumpus (2016) highlights BMI dynamics as key accelerators of the transition to low carbon power systems and their ability to do so independently of the underlying technology. However, the potential of the emerging technologies in parallel with the digitalization also raise the potential for shifts. It will require changes in the whole structure of the industry for the energy sector to transform towards a more sustainable production with an increasing share of RESs (Richter, 2012). The author suggests and exemplifies the use of BMs as an analytical framework to address the changes of companies as consequences of the emerging energy transformation since it is primarily identified to be concerned with questions of value creation and capture.

A review of the literature by Parida et al., (2019), further recognizes BMs as a critical factor in enabling sustainable industries through digitalization and highlights linkages between BMI, digitalization and sustainability benefits. Di Silvestre et al., (2018) also raise attention towards digitalization and additionally two phenomena of decentralization and decarbonization as current driving forces of change and years to come. We see a new era where an increasing number of industries have become "smart". The use of the Internet of Things (IoT) technologies, big data analysis, and predictive data modeling, enables automation and optimization that make processes more time-efficient, allowing cost savings (Parida et al., 2019). The main actors in the digital revolution are stated by the World Economic Forum to be cloud, IoT and Mobile (Di Silvestre et al., 2018). The cloud aid organizations process and analyze big data in real-time. At the same time, Mobile enables new business scenarios, and social channels enhance the ability to connect with customers immediately, instantly and inexpensively (Di Silvestre et al., 2018). Motivated by opportunities that follow, the experimenting of innovative BMs based on emerging tech is flourishing. A study by Capgemini (2020) further predicts that the lines between data-enabled services, energy equipment and infrastructure will continue to blur while being a part of the transformation process of the energy sector. However, the authors highlight the gap in research regarding how companies can leverage these digitalization opportunities to transform BMs to achieve sustainability advantages (Parida et al., 2019).

Tongur and Engwall (2014) further underline challenges and unclarities of the interaction between BMs and technological shifts, particularly for incumbents, as the risks of holding back vital changes affects the value proposition, creation and capture. Moreover, a study of BMs challenges addressing diffusion of Solar PV by Karakaya et al. (2016), exemplifies how new BMs within the energy sector can be obstructed by the existing ones while additionally being limited by policies.

2.1.3.1. BUSINESS MODELS AND DISTRIBUTED ENERGY SOURCES Decarbonization is a rising topic that is encouraged by international and national policies to be achieved through energy efficiency, low carbon energy sources, and RES technology within the fields of power generation, transport, and use (Di Silvestre et al., 2018). Additionally, the world sees grown involvement from consumers and increased demand that together open up for decentralization on the distribution level.

It is pointed out in the literature that awareness exists among energy utilities regarding the need for innovation and new BMs to handle the changes occurring within the energy sector (Bryant et al., 2018). The electricity prices have recently increased while costs for Renewable Energy Technologies (RET) manufacturing decreases, and governments introduce clean energy incentives, opening opportunities for new BMs (Wainstein and Bumpus, 2016). These developments have resulted in increased incorporation of DERs that include not only RET but also smart meters, batteries, and electric vehicles (Wainstein and Bumpus, 2016). This progress towards energy generation based on renewables increases the ability to create successful demand response programs that help overcome supply-demand mismatch (Wainstein and Bumpus, 2016). Additional contributing factors lie within socially active BMs to develop a smarter and more responsive power supply (Rodríguez-Molina et al., 2014; Wainstein and Bumpus, 2016). End-user co-operation is a vital part of enabling a two-way flow of the power system, making it more resilient, while also proven to be a success factor in community energy projects (Wainstein and Bumpus, 2016). Richter (2011) further points out a raised importance of customer relationship management for utilities of all scales with the increased competition within the energy sector, despite the fact that customer demand is not a primary driver for RET investments. Although several benefits are growing with the incorporation of DERs, it also brings complexity to the energy system making it difficult for existing utilities to adapt their BMs financially. Further, it also brings uncertainties of deviations, line losses that can lead to imbalance and subsequently higher prices to pay for consumers (Brown et al., 2019). Nonetheless, the rapidly emergent digitalization in combination with urban development offers opportunities for new BMs, creating novel exchange routes of goods and services based on the paradigm of ‘digital business’ via peer-to-peer and transparent transaction (Di Silvestre et al., 2018).

2.1.4. PLATFORM BUSINESSES With the area of digital business, there are numerous types of platforms that have emerged and become discussed within the literature, based on various definitions and characteristics, all bringing different parties together (Gawer and Cusumano, 2014). The rise of digital platforms has opened up for radical changes in how we work, socialize, create value, and strive for profits (Kenney and Zysman, 2016). Essential for all platform businesses is the centrality of data, referred to as the basic resource that drives the firm and creates advantages over competitors. Business platforms have become a central resource for both tech and non-tech sectors, designed to extract and manage data through monitoring all interactions between concerned parties (Srnicek, 2017). Platforms enable flexible and dynamic businesses through facilitating an open and participative infrastructure that blurs boundaries between the digital and physical world when converging people, businesses, and

things (Yablonsky, 2018). The application of big data and cloud computing, together with new algorithms, is predicted to change the structure of the economy and the nature of work (Kenney and Zysman, 2016).

The emerging digital platforms could be found in a growing number of industries, of which the energy sector is one of them (Yablonsky, 2018). Studies from the Energy Social Sciences indicate several possibilities from the development of energy platforms, where citizens could engage with energy and participate in the energy transition (Kloppenburg and Boekelo, 2019). A report from Siemens (2019) further raises attention to platform-based solutions as BMs focusing on consumers are becoming more significant as prosumers influence the energy landscape and are key in advancing towards a decentralized and two-way energy system. This way traditional passive consumers could be empowered to become both users and producers, managing their consumption, generation and storage of energy on their own (Geissinger et al., 2019). The use of decentralized ownership of assets, online platforms provides a digital environment that enables business and social activities by connecting users to resources, facilitating P2P transactions (Kenney and Zysman, 2016; Kloppenburg and Boekelo, 2019). A Multi-Sided Platform (MSP) is a type of business which creates value by facilitating the exchange of products or services among two or more distinct but interdependent groups of customers, meaning that value can only be created on one side if there is sufficient participation on the other sides of the platform (Osterwalder et al., 2010). These types of platforms have shown strong disruptive potential (Stummer et al., 2018). Take for example, AirBnB or Uber which used the platform as a BM and disrupted traditional industries like taxi and hotel services (Yablonsky, 2018). Previous research shares concerns about how this development of platforms has disrupted traditional businesses and become at the front-edge towards a shared economy (Geissinger et al., 2019; Pouri and Hilty, 2018), or the term preferable to Kenney and Zysman (2016), platform economy. These digital environments reposition the entry barriers and structure of the traditional economy as it changes the nature of how value is created and captured (Kenney and Zysman, 2016).

Despite the many beneficial opportunities, Pouri and Hilty (2018) argue that the potential impacts of the shift towards a shared economy should be evaluated in the context of sustainability. Most platforms do not possess physical infrastructures or assets but instead provide a service on top of these (Kloppenburg and Boekelo, 2019). A key promoting characteristic of digital platforms is agreed by Kloppenburg and Boekelo (2019); Pouri and Hilty (2018) to be providing on-demand access to existing products that, in turn, lowers the need for producing new products.

Flexible Energy Trading

Findings from previous publications regarding energy trading present different design approaches that are further discussed, analyzed and implemented (Eid et al., 2016; Mengelkamp et al., 2019; Teotia and Bhakar, 2014). These could be divided into different set-ups, whereas the most central for this thesis are P2P energy trading, LEMs, and the traditional Conventional System. The main difference is whether the system is based on a centralized or distributed generation system, visualized in Figure 2. P2P energy markets apply direct trading of energy from small-scale DERs among local energy prosumers, mostly enabled by Information and Communication Technologies (ICT). P2P trading allows each peer to decide from whom to either buy or sell energy from based on costs, reliability, profit, etc. (Zhang et al., 2018). LEMs are the coordination of a decentralized energy system within a local geographical or virtual area, where the set-up could either be based on a centralized or decentralized market control (Ampatzis et al., 2014). Centralized market control could be implemented through the use of aggregators, while decentralized could include P2P trading, (Menniti et al., 2014). The combination of LEMs and P2P trading is referred to as Federated Power Plants (FPPs) (Morstyn et al., 2018). Contrary to P2P markets and LEMs, the conventional system is completely centralized and has a unidirectional flow instead of multidirectional (Zhang et al., 2018).

FIGURE 2. CENTRALIZED (LEFT) VS. DECENTRALIZED (RIGHT) POWER GENERATION SYSTEM DEVELOPED BY THE AUTHORS

There is a growing integration of DERs that have been explored by various scholars for different LEM concepts (Eid et al., 2016). When focusing on electricity distribution, authors refer to microgrids, smart grids, and virtual power plants (VPPs). Microgrids are clusters of DERs and loads, which operate either as a part of a power network or autonomously in an islanded mode (Morstyn et al., 2018). When integrating digitalized technologies into the microgrid, such as smart meters etc., microgrids become smart grids enabling simplified energy management (Parag and Sovacool, 2016). Further, VPPs also called smart distributed generation control systems (482.solutions, 2019), are likewise collections of DERs, however, always connected to the grid using existing infrastructure (Morstyn et al., 2018). VPPs include the interplay of various energy sources and could suffice as a balancing tool for the electricity system (482.solutions, 2019).

2.2.1. LOCAL ENERGY MARKETS The field of literature that covers local energy systems is a relatively new explored area, which has exponentially increased in the last two decades (Mengelkamp et al., 2019). The traditional market is facing challenges adapting to the new consumer-oriented market design consisting of new sources of energy generation, infrastructure, technologies, and increasing demand (Teotia and Bhakar, 2014). Resulting in energy systems across the world are going through a radical transformation (Koirala et al., 2016). International Conference on the European Energy Market et al. (2016) argue that to make the current energy system more sustainable, reliable and affordable, the traditional energy management approach needs to be re-organized and no longer be based on a top-down approach. Instead, their study suggests the introduction of LEMs (International Conference on the European Energy Market et al., 2016) - the coordination of decentralized energy supply, storage, transport, conversion, and consumption within a specific geographical area (Eid et al., 2016). This is further highlighted by (Koirala et al., 2016), arguing that a more bottom-up solution would increase global welfare and capture advantages. Further, authors argue that energy systems on a LEM could provide a greater balance for the system, locally as well as centrally, where energy residues could be utilized nearby including flexibility among end-users (Bremdal et al., 2017). However, there is a gap of extensive evaluation in case of implementation and united definitions as well as clear limitations within the area are still insufficient.

Current research is mainly focusing on specific cases including individual characteristics and circumstances, resulting in the absence of a holistic understanding of decentralized energy systems (Koirala et al., 2016; Mengelkamp et al., 2019). Yet, individual and specific cases result in approaches that vary greatly and difficulties in distinguishing a unique trend towards a generalizable approach (Koirala et al., 2016). However, Teotia and Bhakar (2014) have categorized LEMs according to its locality and drivers, promoting the planning, implementation and operation phase. The structure of the market could be described in two different contexts, technical and economical. The technical perspective covers characteristics such as power stability, voltage, frequencies, active and reactive power control, and additional features including technical components. The economical perspective, on the other hand, includes BMs, market structure, trading options, energy communities, and similar aspects (Teotia and Bhakar, 2014). Moreover, these markets differ in design depending on the configurations of the local power system, characteristics of market participants, and objectives

of the actors, including producers, consumers, suppliers, network operators, aggregators, etc. (Ampatzis et al., 2014), see Figure 3.

FIGURE 3. CATEGORIZATION OF LOCAL ENERGY MARKETS (TEOTIA AND BHAKAR, 2014)

As illustrated in the figure above, ownership of LEMs could vary between community, local authority, private, and jointly (Teotia and Bhakar, 2014). Depending on the owner and type of usage, the markets could be formed either virtually or geographically, and could differ in size depending on participants (Steinheimer et al., 2012). Regardless, an important role that needs to be filled is the role of the market operator, taking responsibility for a market set-up including clearing and transaction management (Bremdal et al., 2017). Additionally, the market operator plays a decisive role in whether or not the market will be run monopolistic by network operators (DSOs or TSOs) or by a third party, and whether it is separated or integrated with other markets. Furthermore, the independence of the operator from market activities is discussed to be crucial in the matter of ensuring transparency and neutrality between buyers and sellers (Stanley et al., 2019; Schittekatte and Meeus, 2020). In regard to this, a third party is emphasized to assure this for the cases where both DSOs and TSOs are users of the same interface and where flexible markets are integrated with the wholesale market (Schittekatte and Meeus, 2020). However, the authors further highlight arguments opposing third party market operators due to interface management costs and risks for conflicts of interests. Common for the different types is that they require active, involved, and interactive participants enabling the development of LEM. These integrated consumers result in increased understanding raising awareness of the environmental impact of energy consumption and generation, improving the link between local communities. The market platform is then formed by the market players, pricing mechanism, and market-clearing while the driving mechanism is counting of the installed power, type of load, and quantity of generated energy, together creating the delivery mechanism (Teotia and Bhakar, 2014).

2.2.2. LOCAL MARKETS WITH AGGREGATORS

As previously mentioned, several studies propose the integration of aggregators into the LEMs, resulting in a concept in between a completely P2P market and the traditional conventional system (Menniti et al., 2007; Morstyn et al., 2018; Olivella-Rosell et al., 2018). The authors point out the advantages of LEMs using aggregators as a local market operator, managing flexibility transactions (Morstyn et al., 2018; Olivella-Rosell et al., 2018) and having a non-profit entity aiming to maximize members utility (Menniti et al., 2007). The integration of aggregators enables centrally made decisions for local issues where the aggregator has a complete overview, making decisions to benefit the community as a group instead of individual participants. These aggregators could serve as a trading platform, sharing information, scheduling flexible devices, as well as trading flexibility (Olivella-Rosell et al., 2018). The author refers to this concept being based on the combination of value offered by VPPs and P2P energy trading platforms (Morstyn et al., 2018), defined as FPPs (Morstyn et al., 2018; Olivella-Rosell et al., 2018). The authors further highlight this concept as the natural development for the P2P energy trading platform, where a key objective is to provide a transparent mechanism, increasing the trust and acceptance from prosumers, allowing the market to balance their requirements together with their preferences (Morstyn et al., 2018).

The Prosumer Era

The growing integration of DERs results in traditional consumers becoming prosumers, meaning consumers who both consume and generate energy (Zhang et al., 2018), considered as key actors for a distributed and democratized energy future (Brown et al., 2019). Parag and Sovacool (2016) refer to local markets as the key for managing the distributed renewable generation and for coordinating decentralized market models. Advances in electricity generation and storage technologies have resulted in an increasing number of prosumers in European countries exploiting solar panels, electric vehicles, batteries, or other channels (Parag and Sovacool, 2016). Findings by Brown (2019) states that BMs addressing prosumers are most likely to succeed when delivering value for both prosumers and the wider energy system. Parag and Sovacool (2016) have identified three possible models with the potential to integrate the growing number of prosumers into the energy market; P2P prosuming models, prosumer-to-grid integrations, and prosumer community groups, see Figure 4.

FIGURE 4. DECENTRALIZED MARKET MODELS (PARAG AND SOVACOOL, 2016)

The first structure, see structure A in Figure 4, illustrates P2P markets, developed based on the sharing economy concept like Uber and Airbnb (Parag and Sovacool, 2016). When referring to a peer in P2P energy trading, authors apply to one or a group of local energy customers interconnecting directly, buying and selling energy services among each other without intermediate conventional energy suppliers (Zhang et al., 2018). These models include decentralized, flexible, and autonomous networks in which the distribution grid is paid a fee and tariff for its function depending on the character, the quantity of service, and distance between provider and consumer (Parag and Sovacool, 2016). Several authors from recent literature highlight the use of P2P communication channels when developing a platform for energy trading (Jogunola et al., 2017; Zhang et al., 2017). Even though the research is still in an early stage, primarily focusing on evaluating technologies to implement for the trading processes (Park and Yong, 2017), P2P trading is considered as a promising solution for handling necessary characteristics within the energy sector, such as high efficiency, flexibility and dynamicity (Jogunola et al., 2017). Where it has been shown that BMs for digital platforms within

other industries using sharing economy could be used as templates when developing LEMs (Bremdal et al., 2017).

The second structure, see structures B and C in Figure 4, illustrates two distinct ways of designing a prosumer-to-grid model. Both structures include prosumers being connected to a microgrid, aggregating or capturing the value of presuming energy services. Either by the grid itself is connected to the main grid, see structure B, or autonomously processes in a so-called island mode, see structure C. Microgrids that are interconnected to the main grid allow prosumers to generate as much electricity as needed, completely depending on the demand. On the other hand, with an island mode, prosumers are dependent on the generation and excess from the microgrid, which is an advantage only if storage and load shifting services are accessible. Lastly, the third market, Organized Prosumer Groups, see structure D in Figure 4, could be described as somewhat in between the two previously mentioned models. Serve the interest of a group of prosumers, including local communities, organizations, and neighborhoods managing their energy needs, balancing resources, and stakeholders.

2.3.1. ENERGY TRADING PLATFORM BUSINESSES Apart from energy trading platforms allowing small suppliers to compete with large traditional suppliers and reducing transaction costs, these platforms offer three particular value-streams, energy matching, uncertainty reduction, and preference satisfaction (Morstyn et al., 2018). By scheduled storage systems and flexible loads, prosumers with matching demands and excess energy could obtain beneficial energy transactions, where the potential for local utilization of variable renewable sources increases (Boait et al., 2017). Reduced upstream generations, transmission requirements and reduced losses are being highlighted as a potential outcome increasing the energy matching (Steinheimer et al., 2012). In terms of uncertainty reduction, Boait et al. (2017) argue that prosumers are presumed to benefit from P2P platforms by enabling contracts as cooperative groups. This is also argued by Hvelplund (2006) mentioning co-operative neighbor ownership as one essential reason to succeed with the development of integrating RETs into the energy system. Since renewable sources and small loads are usually hard to predict, due to high variations and price fluctuations, prosumers could share information and risks commonly in these cooperative groups (Boait et al., 2017; Zhang et al., 2018). Lastly, preference satisfaction is argued to be enhanced since previous research noticed that prosumers have a lot of preferences when it comes to the environment and local communities (Silva et al., 2012). Through the integration of consumers together with more and more transparent processes, prosumers could track their energy generation, consumption, and storage, resulting in higher preference satisfaction (Boait et al., 2017).

Software platforms could be designed in various ways to facilitate P2P energy trading (Zhang et al., 2018). It is found by Brown et al. (2019) that prosumers value simplicity rather than control over the electricity system. Blockchain technology has been considered as a promising technique for the decentralized P2P energy trading markets enabling security and privacy (Siano et al., 2019; Zhang et al., 2017). With the increasing number of prosumers managing DERs, complexity and risks with transactions will rise correspondingly (Mortier, 2019; Sousa et al., 2019), where blockchain is argued being a secure solution providing smart contracts and a billing system for online platforms (Zhang et al., 2017; Siano et al., 2019). Implementing blockchain technology into P2P trading solutions could

also be identified among several actors. Thanks to a flexible monitoring and control system, data can be managed without third-party interference (Sousa et al., 2019). Despite the advantages that follow the blockchain solution and the attention that it has brought to it, the authors point out that P2P markets can exist without this particular technology.

Theoretical Framework

Multi-level Perspective on Energy Transitions

The MLP developed by Geels (2002) has been an important framework among transition-scholars (Geels, 2012; Verbong and Geels, 2007), used as an analytic tool in order to understand the dynamics of large-scale transitions in its socio-technical context, see Figure 5. Hence, the MLP framework has high relevance in this type of studies on energy system transition as it provides a useful approach to map out the shifts and tensions between new and incumbent actors as well as innovations that drive shifts of new technological systems (Wainstein and Bumpus, 2016). Transitions make up multiple developments that interact on three different analytical levels resulting in non-linear processes, consisting of following, starting at the bottom of the hierarchy (Geels, 2012): niches, socio-technical regime, and socio-technical landscape.

FIGURE 5. MULTI-LEVEL PERSPECTIVE ON TRANSITIONS (GEELS, 2012)

Previous research has shown that for a transition to be in place, there is a need to integrate and reinforce all three levels (Verbong and Geels, 2007). Niches could be explained as protected spaces where innovations, crucial for transitions and systemic change, are supported and emerged (Markard et al., 2012). Actors aim to eventually get their novelties into the regime or even replace it. Succeeding is, however, obstructed by the existing regime that is stabilized by multiple lock-in mechanisms and path dependence (Geels, 2012). This particular research area could be considered currently exploring at a niche innovation level, where digital platforms enabling energy trading on a decentralized level strives to enter the highly stable trajectory of the centralized energy market, making up the socio-technical regime. Further, Wainstein and Bumpus (2016) argue that the incumbent energy regime is challenged by clean energy technologies and energy-saving practices.

Socio-technical systems are constructed by elements such as existing technologies, regulations, patterns made by users, infrastructures and cultural dimensions that can be changed by social groups and actors (Geels, 2012; Wainstein and Bumpus, 2016). Further, these actors are enclosed in a regime that refers to the meso-level, formed by deep-structural rules that steer and coordinate the perceptions and actions. This level of the MLP is of central interest since transitions are defined as the shifts from one regime to another (Wainstein and Bumpus, 2016). In this context, changes occur somewhat predictable in a specific direction that can establish stable trajectories. Further innovations are dominantly incremental rather than radical due to path dependence and lock-in (Geels, 2012; Markard et al., 2012). However, external pressure on the regime, originating from the macro-level consisting of the socio-technical landscape could allow for diffusion of innovations and give rise to new corporate actors (Wainstein and Bumpus, 2016). The socio-technical landscape level of MLP influences the dynamics of the two underlying layers in a degree away from individuals to control. External landscape developments include ideologies within politics, trends within the macro- economic field, societal values, beliefs, concerns as well as media landscape (Geels, 2012; Geels 2007).

The MLP framework has particularly been applied to ‘green’ innovations but faces criticism regarding insufficient attention to aspects such as power and politics as well as regimes and incumbents which are important dimensions of the framework (Geels, 2014). Smith et al. (2005) further emphasize this, arguing that the MLP understates the role of agency in transition, and criticizes it being too formal and detailed. Despite the given critique, several authors emphasize a key characteristic of the MLP being the straightforward approach of structuring and facilitating analysis of complex large-scale transformations (Smith et al., 2010). To further characterize the energy transition through the MLP interactions, Wainstein and Bumpus (2016) suggest the adoption of BM theory given the impact niche actors have on disrupting regimes.

Business Model Canvas for Multi-sided Platforms

Wainstein and Bumpus (2016) shed light on the usefulness and importance of BM analysis in future power system transition research. The usefulness is additionally highlighted by Huijben and Verbong (2013), arguing that BMs are key drivers when introducing new technologies to the market, such as new technology solutions within the energy sector. However, the authors further express concerns regarding the experimental and learning context that innovative BMs have to operate in due to rapidly shifting conditions which cannot be fully predicted. MSPs have evolved as a way to enable direct interactions between multiple parties that become affiliated with the platform (Hagiu and Wright, 2015). Yablonsky (2018) further emphasizes this type of platforms to extend mutual benefit through allowing partners, providers and customers to create a community for sharing and enhancing digital processes and capabilities. The platform provides the infrastructure for these interactions, where the paper by Solita (2020) highlights the need of simplified value creation for all segments, including simple and seamless synergy. An additional phenomenon of MSPs, called the network effect, is that it grows in value with the number of new users it attracts which can be seen as a same-side effect or cross-sided effect (Osterwalder et al., 2010; Stummer et al., 2018). A common challenge connected to this that may be decisive for early-stage MSPs’ success is the chicken-and-egg- dilemma (Muzellec et al., 2015; Osterwalder et al., 2010; Stummer et al., 2018). This refers to the challenge of creating platform growth through making sellers want to connect with buyers through the platform with an attractive number of buyers, while only an attractive number of sellers will connect the critical number of buyers (Stummer et al., 2018).

Osterwalder et al. (2010) describe how BMC could be adapted to multi-sided businesses, making the concepts comparable, understandable, and applicable, see Figure 6.

FIGURE 6. MULTI-SIDED PLATFORM BMC DEVELOPED BY THE AUTHORS BASED ON OSTERWALDER ET EL. (2010)

The BM characteristics of MSPs are based on them having two or more customer segments leading up to a value proposition needed to be adapted accordingly to produce revenue streams of each segment (Osterwalder et al., 2010). All users are affiliated to the platform through shared technologies and interfaces, including both software, hardware, and networks (Kenney and Zysman, 2016). Corresponding to the main components of the platform architecture, containing interactions from data producers, data ingestion, data storage, etc., where the platform itself is considered the key resource (Solita, 2020). The key activities that follow are commonly platform management, service provisioning, and platform promotion (Osterwalder et al., 2010). Further, according to the authors the value proposition is usually based on three common value creations: 1) attracting users, 2) matchmaking of user segments, 3) channeling transactions to reduce costs. Common cost structures that platforms have to deal with is maintaining and developing the platform. Even more importantly, MSP businesses need to handle its revenue streams and decide on which segment is the most price sensitive and if it is possible to use revenue flow subsidy from other sides as an approach to avoid the chicken-and-egg dilemma (Osterwalder et al., 2010; Stummer et al., 2018). Using subsidizing in a platform strategy can help attract the money-side of the MSP that is charged for its participation, through having the users on the subsidy-side have discounts or even free of charge access to the platform (Stummer et al., 2018).

Business Models within the MLP

The energy sector is usually conceptualized as a socio-technical system, including a variety of elements nearly interrelated and reliant on each other, implying barriers for transformation (Markard et al., 2012). Incumbents of the sector are currently challenged by niche innovations of new technologies enabling clean energy and more efficient solutions (Wainstein and Bumpus, 2016). Yet, from a market perspective the diffusion of these innovations requires commercialization through BMs to compete with incumbents and break through to the regime level (Wainstein and Bumpus, 2016). Moreover, the MLP framework has high relevance in this type of studies on energy system transition as it provides a useful approach to map out the shifts and tensions between new and incumbent actors as well as innovations that drive shifts of new technological systems (Wainstein and Bumpus, 2016). Furthermore, Bidmon and Knab (2018) point out a weakness of the MLP, being a global and general model that does not provide sufficient details on the connections between technologies, stakeholders and mechanisms of socio-technical transitions. Instead, the authors suggest the missing piece to be the adoption of BMs as it provides a more elaborate view of the links between local dynamics on an industry level as well as the global dynamics on a systemic level. This is further strengthened by Wainstein and Bumpus (2016), meaning that analysis of BMs should hold a vital part in further transition research, to understand actors and business dynamics in low carbon socio-technical transitions. Several authors highlight the importance of BMs to further portray the niche development that drives transitions by disrupting the regime and their multilevel interactions in the context of the energy transition (Geels, 2011; Huijben and Verbong, 2013; Wainstein and Bumpus, 2016). In recent years, the use of theoretical frameworks integrating BM theory within sociotechnical transition concepts has been increasingly utilized as an explanatory model (Bidmon and Knab, 2018; Geels, 2011; Huijben and Verbong, 2013; Wainstein and Bumpus, 2016). The combination adapted to the framework MLP presented in the literature review, has in particular been proven useful in sectors where significant societal changes are likely to occur (Loorbach and Wijsman, 2013). However, there is a need to identify the role of BMs in socio-technical transitions, where a good approach could be to find its place within the MLP (Bidmon and Knab, 2018).

Bidmon and Knab (2018) emphasize the importance of BMs as a potential for achieving systemic change as well as disrupting entire industries. Authors compare BMs with vehicles, bringing new technologies to the market as a source of innovation and competitive advantage (Breakthrough). Yet, studies investigating the exact role of BMs in societal transitions are still limited (Bidmon and Knab, 2018). The authors have conceptually integrated characteristics and functions of BMs into the MLP to address this gap and identified three potential roles for BMs. The combination of BMI and the MLP has been chosen as a suitable theoretical frame of reference that makes up the base for the analysis of empirical findings gathered in this study. More specifically, the framework of the study will build on Bidmon and Knab (2018) model of explaining BMs as intermediates between niche innovations and the regime, working as drivers and stabilizers of niches’ breakthrough to the regime level. The BMs place within the MLP is shown in Figure 7 and is illustrated as driving forces from the niche’s journey to the regime level in the form of dotted triangles enclosing the technology, illustrated as arrows in the figure. The viable BMs accelerate the technology to scale-up, break through and further diffuse from current to the new regime. This process could also be described as

a progressive development of sub-regimes where the novel technology includes more and more actors in the current regime, to collaboratively disrupt it from within. (Bidmon and Knab, 2018)

FIGURE 7. BUSINESS MODELS AS INTERMEDIATES BETWEEN NICE AND SOCIO- TECHNICAL REGIME (BIDMON AND KNAB, 2018)

For intermediate BMs to break through from a niche to a regime level, three sub-processes need to be taken into action (Bidmon and Knab, 2018). The first sub-process involves the articulation of expectations and visions, aligning activities of actors and attracting attention and funding. For this sub-process, BMs play an important role as the value creation and capture of niches is allowed to be articulated, promoting a collective understanding among actors. Hence, this sub-process serves as a point of reference for communication as well as a decisive factor on negotiating and compromise among various actors that represent a dominant technological design. Secondly, BMs act as a communication channel for knowledge, aiming to support learning processes for improved performance. To support these learning processes, BMs seek to strengthen the potential of the technology taking user preferences into account, to increase the awareness and attention of the

innovation. The last sub-process includes the creation of social networks, connecting technologies with stakeholders. These connections prove the viability of the novel technology, which is further stabilized when more and more actors and stakeholders’ affiliates.

The degree of impact BMs have in the role as intermediates is argued to be dependent on whether a BM is existing or novel (Bidmon and Knab, 2018). This is motivated by the advantage existing BMs have with already established relations with regime actors, leading up to a better fit with the regime and thus more strength to commercialize technological innovation compared to novel BMs. Hence, it is further argued that BMs developed in alignment with the current regime logic have greater potential to exploit the regimes’ infrastructure and works as facilitators to diffuse innovations while novel BMs are considered having higher potential driving transitions (Bidmon and Knab, 2018).

Methodology

This chapter describes the research design of the study followed by a summary of the research process. Further, the methods used for data collection of the pilot study and empirical investigation are presented followed by the methodology behind the data analysis. Lastly, the research quality in terms of validity and reliability is layered-out for and the ethical consideration explained.

3. Method

Research Design

This study has its roots in a company-specific problem that has been put in an academic context. Research addressing digital energy trading platforms is in the early stage, which might be the reason for various gaps in previous literature. The purpose of the study is explorative, meaning that the study aims for a broader understanding of the research area, rather than providing a final and conclusive answer to the research question (Dudovskiy, n.d.; Saunders et al., 2009). An exploratory perspective is particularly useful when comparing theory with emergent concepts or hypotheses within a newly explored field of literature (Ridder et al., 2014). Studying the phenomena in its natural setting through a case study could then be considered as an appropriate research design, (Blomkvist and Hallin, 2015; Saunders et al., 2009; Yin, 2003), as it provides in-depth empirical material that underlines the complexity of reality to the research (Blomkvist and Hallin, 2015). Which is considered as highly relevant due to the wide and complex phenomenon that this research is focusing on (Yin, 2003). The choice of using a case study approach is further strengthened by Yin (2003), highlighting case studies as an appropriate strategy when addressing exploratory "what" questions intending to develop relevant hypotheses for further analysis. Since this thesis aims to investigate what BM design is suitable for a market that does not yet exist on the Swedish market, an exploratory case study is considered beneficial. However, Blomkvist and Hallin (2015) also raise critique concerning the case study approach being inadequate for providing statistically generalizable results. The degree of applicability to other research settings can instead be argued through analysis and discussion to generate analytical generalizability.

The validity of research was enhanced through triangulation, an approach supported by Gibbert et al. (2008); Saunders et al. (2009). It is considered as a significant strength for the data collection when fulfilling a case study, where various sources of data have been taken into account to address research questions defined for the thesis (Yin, 2003). The empirical research based on the company specific case study was triangulated with semi-structured interviews along with investigation and data collection of the application projects as illustrated in Figure 8. As the definition of different platform market designs was defined on a generalized level and varied between different literature, investigations of existing application projects were utilized to define different market designs even further. Through the use of different data sources and data collection to view the same phenomenon from different perspectives, any findings and conclusions is likely to be much more accurate (Yin, 2003).

FIGURE 8. TRIANGULATION OF THE STUDY

Blomkvist and Hallin (2017) suggest an abductive research approach when the study requires shifting between theories within the literature and empirical data during the process. Since this study aims to investigate how theories can be applied to practice, alteration between an inductive and deductive approach is considered beneficial. Furthermore, the use of an abductive approach enables flexibility which Eisenhardt (1989) emphasizes is a key attribute when the theory is based on a case study. It facilitates the work to be dynamic and when new findings emerge, there is an openness for adjustments throughout the process.

Given the exploratory approach of the study, the gathered data was conducted through a qualitative study including interviews, observation and collecting relevant documents regarding digital energy trading platforms. Qualitative method is mainly used when aiming for a contextual understanding where semi-structured methods like interviews and observations are used to conduct the data (Blomkvist and Hallin, 2017). The qualitative study was carried out rigorously aiming at reporting clear and concise material that will favor the research to a greater degree than traditional survey research (Shah and Corley, 2006).

Research Process

The research process executed for this thesis was initiated by a literature review, exploring current knowledge and research within the particular field of interest. Findings from the literature review was later used to identify a gap within the existing field, formulating relevant research questions, and the purpose of the study. To obtain sufficient knowledge about the case that was given from the case company, a pilot study was conducted. This process followed an iterative manner between reviewing the literature, semi-structured as well as unstructured interviews with experts on the area. The research process proceeded with data collection of the state-of-the-art for the Swedish electricity market, to give the reader sufficient knowledge about the current state and future trends of the market. This was followed by further review of the literature, aiming for a broader investigation of the field, iteratively with data collection, evaluation of findings, and analysis. The research process applied for this thesis is visualized in Figure 9 below.

FIGURE 9. RESEARCH PROCESS

Data collection

The study consists of qualitative data conducted through a pilot study, semi-structured interviews, and use-case evaluation. Each process of collecting data is described below, in order to provide transparency and replicability.

3.3.1. PILOT STUDY This study originates from a reality-based project called Tamarinden, considered as the proof-of- concept for this thesis. The project includes the development of a community with a future proof energy system, where this thesis aims to develop a BM for a digital platform enabling this. To collect sufficient knowledge about the project, the data gathering process included a pilot study. This consisted of interviews with stakeholders of the project, company-specific reports as well as information and presentations of current work. The process has been iterative during the data collection in order to continuously collect real-time data.

The selection of appropriate interviewees was based on both their level of participation in the project as well as expertise within the energy sector. The internal experts at the case company guided the scope and delimitations, being the foundation of the thesis. External actors, yet participants in the project, provided insights and knowledge from specific perspectives such as real estate owners and energy providers.

3.3.2. SEMI-STRUCTURED INTERVIEWS This study consisted of 13 semi-structured interviews, aiming to generate an understanding of the potential of digital platforms within the energy sector. The used approach enabled flexibility during the interviews, allowing adjustments for each situation and source while still capturing the essence of a complex phenomenon (Blomkvist and Hallin, 2015). All interviews were given the same timeframe of 60 minutes with a few exceptions and were conducted via digital video conferences on recommendations from the public health authority, due to prevailing circumstances of an outbreak of a COVID-19 pandemic. The interviews followed templates that were developed, including themes and question areas that each interview should cover, see Appendix A. These templates varied depending on the interviewee's area of expertise, role, as well as the purpose of participating, in order to cover the entire research topic. The use of mainly open questions allowed participants to talk freely within each area of interest and further define and describe situations and outcomes (Saunders et al., 2009). The respondents were selected to cover four specific fields of research areas, whereas BMI, energy trading, platform businesses, and LEMs, see specifications of interviews in Table 2.

TABLE 2. SPECIFICATIONS OF INTERVIEWS

A majority of the interviews were conducted in Swedish while remaining interviews with non- Swedish respondents were conducted in English. As preferred when conducting semi-structured interviews, yet more important when performed digitally, all interviews were audio-recorded as well as transcribed (Saunders et al., 2009). The material was further analyzed and presented in English, where the process of translation of transcription could include the risk of misinterpretations, further discussed in the below, see chapter 4.4 Data analysis.

3.3.3. APPLICATIONS To provide an overview of existing projects within the chosen research field, an application mapping was executed, aiming to identify, clarify, and organize various conditions. Initially, a broad range of projects was collected, mapped, and categorized based on BMs, technologies, and sectors.

At first, there were about 20 applications within a variety of fields, such as energy trading, peer-to- peer trading, and projects based on similar BMs. All compiled in a list, see Appendix B, continuously updated during the research process to capture the ongoing development. These applications were found through primary sources such as company websites, white papers, and corporate reports, as well as through secondary sources within the existing field of literature. Further, an evaluation approach was performed to be able to prioritize and select the most relevant applications for further analysis. The selection was based on platform types, technologies, and architectures, to gain a variety of different approaches aiming for similar solutions. From this selection, five application projects were preferred being the ones with highest relevance for this study.

Data analysis

Since the study aimed to follow an abductive approach, collected data from primary and secondary sources was analyzed parallelly to the collection. Through this approach, potential obstacles could be identified and further addressed in an early stage of the study (Dudovskiy, n.d.).

3.4.1. CODING AND ANALYSIS OF INTERVIEWS For the analysis of the semi-structured interviews, a thematic analysis was used, considered a suitable approach for processing qualitative empirics (Blomkvist and Hallin, 2015). Initially, all the raw materials, in terms of transcribed interviews, were scanned through to generate an overview and organize the information for the analysis (Creswell, 2014). During the process of reading, the recorded files were listened to, avoiding possible misinterpretations that could have occurred during the transcription (Saunders et al., 2009). Further, the analysis included the categorization of the transcribed material, where data were divided into different themes. The categories were developed based on relationships and similarities identified in the material from each interview, followed by clustering these into meaningful aspects. Each category needs to be relevant and valuable both in relation to the data as well as all other categories (Saunders et al., 2009) why validation of the accuracy of the data was continuously conducted, see Figure 10 (Cresswell, 2014).

FIGURE 10. ANALYSIS PROCESS DEVELOPED BY CRESWELL (2014)

The thematic analysis continued with a process of coloring all categories based on the context, into a scheme, see Figure 11. This process was constantly updated during the analysis of data, to increase the possibility of new insights within existing categories (Saunders et al., 2009).

FIGURE 11. OVERVIEW OF CODING

3.4.2. ANALYSIS OF APPLICATIONS The approach applied for the application analysis was based on the BMC concept adopted to the MLP framework. A collection of secondary sources of each application case was synthesized into the BMC for the selected cases, enabling comparison between each project and the case study. The main objective of the analysis was to investigate what BM designs have been applied for digital platforms offering similar solutions as the particular case that this study addresses. Further, the projects’ different roles of stakeholders and how the platform architecture was mapped out, including technology solutions. The analysis was further used as guidance when evaluating theories and findings of the thesis, making them applicable for this particular case.

Research quality

The methodological rigor of case studies is often criticized due to its exploratory characteristics in the early phases of new management and being carried out by interactions with real situations and practitioners (Gibbert et al., 2008). Hence, ensuring the quality of the research requires critical evaluation and the measuring criteria concerning the validity and reliability are numerous, including for case studies (Gibbert et al., 2008). In this section, three commonly used tests relevant for exploratory case studies will make out the base of the presentation of the actions taken to enhance the high quality of this research being: construct validity, external validity, and reliability (Yin, 2003; Gibbert et al., 2008).

3.5.1. CONSTRUCT VALIDITY During the data collection phase, some actions are required to increase the construct validity of a study. It concerns to what extent the study procedure actually investigates and leads to accurate observations of what it claims to investigate (Gibbert et al., 2008). Simply put, it entails that the right things are studied (Blomkvist and Hallin, 2015). The efforts made to enhance the construct validity of this study followed the suggested tactics by Yin (2003). Firstly, multiple sources of evidence as well as triangulation was used to collect different viewpoints on the same phenomena (Yin, 2003; Gibbert et al., 2008). Secondly, a chain of evidence in the form of data collection through interviews, reports and project presentation was collected. Lastly, the report was continuously reviewed by key informants through numerous peer reviews by professors and fellow master students but also supervised meetings at the Royal Institute of Technology, KTH.

3.5.2. EXTERNAL VALIDITY The measures of external validity come with challenges in doing case studies as it refers to whether a study's findings are generalizable beyond the treated case. As mentioned in the research design section, a single case study does not allow for statistical generalization and instead the possibilities to generalize lies with the analytical level from empirical observation rather than a population (Gibbert et al., 2008). Blomkvist and Hallin (2015) highlight "to counter this criticism, we need to be careful about how we choose cases and how we do our case study". Furthermore, Eisenhardt (1989) encourages the use of four to 10 case studies as a cross-case analysis to set up a sufficient base for analytical generalization. Accordingly, this study followed the following tactics: the case study was carefully chosen based on its relevance in time and additional applications were selected based on criteria to limit the weaknesses of a single case study.

3.5.3. RELIABILITY As advised by Saunders et al., (2009), the methodology of a study should be highly structured to enable transparency and replication of the study which is one of the main characteristics of research reliability (Yin, 2003). Accordingly, this study has set out to document the procedures of the case study to develop a database and protocol enabling replication to be accomplished (Yin, 2003). However, all parts of the case study database are not exposed to other investigators due to

confidentiality concerns. Furthermore, transparency has been addressed through careful presentations of used strategies for all steps of the research.

Since there are always various ways to interpret information, the main threat to ensure the reliability of a study is different types of biases and errors from participants and observers (Saunders et al., 2009). To ensure a high level of reliability of applied data, avoiding any biases and errors is vital (Yin, 2003). Suggestively by Blomkvist Hallin (2015), an objective and impartial approach could be used throughout the data collection. Consequently, the empirical data collection was made through a selection of interviewees based on expertise in several fields and not by random. However, as a majority of the interviews and transcription was conducted in a different language than the presented results, an opportunity for biased interpretations of the result appeared. Additionally, Saunders et al., (2009) point out the importance of establishing trust of the participants and paying attention to gestures and tone for the transcription which was limited due to several of the interviews being executed through online meetings. The authors further emphasize that the participants may be restricted in engaging in an exploratory discussion due to the lack of personal interaction. The risk of bias was minimized by posing the same questions to several informants and more than one person evaluating the result. Furthermore, the interviews were conducted with the informant's confidentiality protected (Shah and Corley, 2006).

Ethical considerations

This study aimed to meet the ethical codes presented by the Royal Institute of Technology along with the four principal requirements for scientific work developed by the Swedish Research Council (Blomkvist and Hallin, 2015). For these to be fulfilled (1) the participants of the study has been accurately informed of the purpose of the study, (2) full consent has been agreed with participants in the study, (3) collected information has been treated with confidentiality and lastly (4) has only been included for the particular purpose the participants agreed to. On the one hand, refraining from naming participants might contribute to the transparency of participants since sharing information might be sensitive. On the other hand, not using job details of informants to strengthen arguments diminish the reliability of the empirics which will be limited by this requirement. Furthermore, when presenting the results, it was also vital to leave out our own interpretations and assessments when presenting the empirical findings to enable the reader to make its own judgment of evidence (Bickman and Rog, 2009).

Overview of the Current State & Future Trends

This chapter provides an overview of the current Swedish Electricity Market, introducing main stakeholders along with their areas of responsibility. It also provides an overview of current laws and directives that regulate the market. Lastly, the chapter highlights emerging trends and advancement in energy-related technologies.

4. Overview of the Current State & Future Trends

Overview of the Swedish Electricity Market

The electricity market is the system responsible for the generation, transportation, and trading of electricity, with the overall goal of efficiently sufficing the demand for end-consumers (Teotia and Bhakar, 2014). The market consists of two parts – the physical transfer where electricity is transported via grids from power plants to consumers and the financial part where producers sell electricity (Svenska Kraftnät, 2020). Producers usually sell via the electricity exchange to trading companies, and it will be frequently bought and sold several times before reaching the end consumers (European Commission, 2020a), who pay for both the electricity consumed and the transportation. Since electricity production is usually far away from where demanded, the grid makes out the infrastructure enabling the transmission from producers to consumers. These grids are usually divided into two different categories, transmission and distribution grid, operated by the transmission system operators (TSOs), and the DSOs, liable for gathering, transport, and distributing electric energy (Eid et al., 2016). However, the electrical grid in Sweden is divided into three levels, including the national transmission network as well as regional and local grids both classified as distribution networks (IVA, 2017), as shown in Figure 12 below.

FIGURE 12. THE SWEDISH ELECTRICITY GRID DEVELOPED BY THE AUTHORS

The national grid is dimensioned for large-scale energy generation to transmit large quantities of electricity for long distances (IVA, 2017). It is connected to neighboring countries enabling both imports and exports, allowing balancing the deficit or excess of electricity. The national grid is managed by the authority and government agency Svenska kraftnät, overall responsible for balancing the entire electricity system in Sweden (Svenska Kraftnät, 2019), called a balance responsible party (BRP). Svenska kraftnät further delegates responsibility to companies around the country accountable to ensure that the balance is maintained within each geographical area. Electricity

suppliers are in turn responsible for ensuring that sufficient electricity is produced in order to meet the daily demand. This chain of responsibility applied in the Swedish electricity system is built on balance responsibility (Svenska Kraftnät, 2019). Mainly all output of the national grid flows to the regional, facilitating the transition from high to low voltage. A majority of the regional grids in Sweden are owned by the companies Vattenfall Eldistribution, Ellevio, and E.ON Elnät, supplying electricity to more than half of Sweden's electricity users (IVA, 2017). The regional grid further connects to the local grid, generation plants, and large industries having an intense electricity demand. Lastly, the local grids distribute electricity to the end-users, where small electricity users such as commercial premises and households are connected.

4.1.1. REGULATIONS Swedish laws and directives regulate the Swedish energy market, which in turn are formed and adapted from the EU (Energimarknadsinspektionen, 2019). All regulations from the EU should be directly applied to Swedish law, while directives should be transformed and implemented into Swedish legislation (European Commission, 2020b). These requirements and guidelines from the EU have increased, affecting how the Swedish electricity grid develops (IVA, 2017). As a consumer in the current system, all have the right to decide where to buy one's electricity and have the possibility to self-generate electricity to some extent. When having excess energy, micro-producers have the opportunity to sell the electricity back to the grid, nevertheless, through relatively strict regulations with a maximum quantity to produce (Konsumenternas Energimarknadsbyrå, 2020). However, the distribution takes place via a network monopoly (Energimarknadsinspektionen, 2018). The Energy Union is promoting the transition from these vertically integrated monopolies with large centralized power plants, commonly owned by publicly, towards the clean energy transition with an internal market for electricity with increased competition (European Parliament, Council of the European Union, 2019). Meaning facilitating the use of renewable sources from small power-generation, more included consumers empowered to manage their energy consumption, and regulatory requirements for market operators to provide electricity to the market. To additionally commit to challenges that come with the new energy transition, the European Commission adopted the 'Clean Energy for all Europeans package' in 2016, highlighting the need of improved energy performance in the building sector, accounting for 40 percent of final energy consumption and 36 percent of greenhouse gas emissions in Europe. The package includes rules making it easier for individuals acting as prosumers to produce, store, share, and sell electricity to the grid (European Commission and Directorate- General for Energy, 2019). The Swedish Energy Markets Inspectorate was commissioned by the Swedish government to analyze what measures are needed to implement this EU directive to the Swedish market. Their analysis resulted in a proposal of introducing three new actors to the systems. Firstly, the aggregators which combined consumer loads or produced electricity for trading on the electricity market. This role is an important enabler for consumers to actively participate in the electricity market while contributing to a lower risk of capacity shortages. Secondly, citizen energy communities, which can operate as any player with the purpose to give its members environmental, economic or social and societal benefits. Lastly, renewable energy communities including the local members operating on renewable energy (Energimarknadsinspektionen, 2020).

However, in the report by IVA, it is argued that the traditional electricity market is facing challenges in following this development. The integration of new sources for generation, changes in infrastructure and technologies, as well as a more consumer-oriented market, requires a shift towards a new structure (Teotia and Bhakar, 2014). The European Commission highlights ambitious sustainability targets and gives an introduction to competition in the electricity sector. However, due to DSO being a monopoly party, it is not allowed to trade electricity with the flexibility to end-users within the European system, requiring adjusted regulation enabling competition (Eid et al., 2016).

A future electricity system scenario, including an increased share of renewable energy will probably mean a more dispersed production, highlighting the need for changes to the current grid (IVA, 2017). Furthermore, conventional power plants in Sweden are starting to reach the end of their life cycles and will likely shut down before 2045. By that time, the demand for electricity is predicted to be higher due to increasing electrification in the country (IRENA, 2020). Parts of the existing grid will need to be expanded and reinforced, while other parts will need to be replaced or even removed (IVA, 2017). However, Sweden has an almost fully decarbonized generation system, already leading the global energy transformation in many aspects (IRENA, 2020). According to the report, the current electricity generation consists of approximately 39 percent nuclear energy, 51 percent RESs, and 10 percent combined heat and power. Looking at the total energy supply in Sweden, the generation from fossil fuels has declined from 81 percent in 1970 to 27 percent in 2017. To be able to phase out remaining fossil fuels will mainly be a difficulty for the transport sector as well as some parts of the industrial sector, where innovation within the energy sector combined with more and more electrified solutions, could be a potential future (IRENA, 2020).

Trends and the Future Energy System

Despite the authority the centralized national grid withholds, emerging trends around consumer behavior and advancement in energy-related technologies can easily be identified moving towards a global energy transition. A report from the International Renewable Energy Agency IRENA (2019) additionally emphasizes that the energy transformation not only concerns the global energy sectors. Instead, it is suggested to function as a transformation on a societal and economic level as a shift from fossil fuels to renewables along with the creation of more efficient systems will pay off in socio- economic opportunities.

The drivers of change are mainly the three D's: decarbonization, decentralization, and digitalization which are disruptive phenomena challenging all stakeholders (Di Silvestre et al., 2018). Looking further detailed, IRENA (2020) webpage raises attention to the main drivers of electricity demand growth being the electrification of the transport sector, building sector and industry sector. Additionally, consumers, shareholders, and governments of today have a changed mindset with the threat of climate change, demanding businesses to show responsibility for their carbon emissions actively (Centrica Business Solutions, 2019). This has resulted in a trend where companies integrate their energy strategy with their business strategy, and these organizations can be seen outperforming their competition (Centrica Business Solutions, 2019). According to research conducted by Centrica Business Solutions in 2019, 30 percent of respondents highlighted that investing in energy technology has a direct impact on improved company reputation — a six percent increase compared to the study from 2017.

A report by Siemens (2019) highlights the interface between the grid and the end-consumer to be where the most significant changes towards a transformation happen. Today this grid edge has become increasingly active with the risen interest of consumers in stepping out from the passive demand-side and become prosumers by making their own active contribution by feeding power into the grid. These behaviors evolved with the dramatic rise in installed capacity of distributed Variable Renewable Energy (VRE) such as solar PV and wind (Bryant et al., 2018). This trend of going against the traditional top-down systems and actively participating results in high requirements of the grid to become more advanced to enable a two-way system of distributed generation (IVA, 2017). The energy system faces challenges of how the decentralization occurring due to new RESs need to be managed (Blechinger et al., 2019). Additional factors affecting the grid involve increased levels of urbanization, industrial changes, user flexibility and electrification of the transport sector (IVA, 2017).

A report by Siemens (2019) divides the transition of global energy systems into four phases dealing with different challenges:

● Energy – how fuels are extracted ● Power – how capital expenditures can be used to build capacity from renewable sources ● Flexibility – balancing supply with the demand ● Data – manage and control the relationships of the above to optimize energy flow

Siemens (2019) further indicates the second phase as the one currently under-going and that the most potential for future opportunities lies in how to handle flexibility and data. Digitalization is further referred to as the main enabler to manage the challenges the energy sector is facing (Blechinger et al., 2019). The emergence of IoT technologies empowers the connection between physical and virtual objects (Capgemini, 2020). One of the main concepts of digitalization is this type of information transparency and is closely linked to decarbonization and decentralization as generation from RES requires coordination to attain security and efficiency (Di Silvestre et al., 2018). The transparency opportunities that platforms can provide are a key value proposition (Siemens, 2019), as consumer behavior changes as people are becoming more selective in their buying behaviors based on suppliers' environmental impact (Centrica Business Solutions, 2019). Being a prosumer, the choice of energy exchange lies in the hands of the consumers who have the possibility to choose their preferred producer directly and are allowed direct exchange of locally generated energy (Siemens, 2019). As the number of prosumers in the world is increasing, so is the relevance of local energy platforms to efficiently organize P2P transfer, consumption, generation of RES, and storage. The interest of transactive energy is increasing and so is the interest of platforms that can enable it and further allow consumers to better manage consumption among neighbors and peers (Bryant et al., 2018). A report by Capgemini (2020), highlights application areas of flexible and controllable load through Building Management Systems that can improve the energy consumer's experience through smart lighting and heating.

The Swedish transmission grid is one of the oldest in the world and is soon approaching the end of its lifecycle (Svenska Kraftnät, 2019). Despite this, Sweden holds a strong position at the forefront of the global energy transition and has ambitious policy goals of having a power system 100 percent supplied by renewable sources by the year 2040 (IRENA, 2020) and a net-zero carbon emissions by 2045. To make these goals achievable, a report by IRENA (2020) highlights difficulties facing the policy/regulatory and the system operation fields to ensure energy security, affordability, and environmental sustainability. Hence, it is important to align innovation efforts to systemic power sector transformation (IRENA, 2020).

Empirical Findings

The following chapter sets out to present the qualitative findings from the empirical study of existing applications of energy trading platforms where each application is synthesized into a BMC. The second part of the chapter outlines the main highlights from the interviews. The presented results will make out the base for the analysis and discussions.

5. Empirical findings

Business Models of Applications

There are several projects around the world concerning P2P energy trading developing BMs based on a scattered variance of technologies, research focuses, and conditions (Zhang et al., 2017). This chapter provides an overview of five selected application cases, each addressing ways to solve energy trading through different forms of technical solutions of a digital platform, see Table 3. What these projects and platforms have in common is that they address the energy transition and decarbonization challenges and provide solutions that make billing and data of energy consumption more transparent. Furthermore, some BM characteristics for MSPs are similar, as explained in the framework chapter, and each of the cases’ BM characteristics are further outlined in the following sections.

TABLE 3. DESCRIPTION OF APPLICATION CASES

5.1.1. NODES Nodes was established in 2018 by a joint venture with equal ownerships between the Norweigian utility, Agder Energi and European power exchange, Nord Pool. It is a transparent and integrated marketplace for trading of both energy and flexibility, allowing participants to adjust consumption or production according to a flexibility contract. The market design of the platform consists of open APIs, for the market, grid, flex, and congestion, allowing connections to multiple platforms, not limited to this single platform, see Figure 13 (Nodes, 2020). However, the interface of the platform is currently not yet in place (Schittekatte and Meeus, 2020).

FIGURE 13. NODES MARKET DESIGN (NODES, 2020)

It integrates flexible assets and grid companies on the horizontal level with the vertical level constituting all parts from low voltage and the TSO. The platform is based on continuous trading where flexibility can be obtained in an intraday timeframe by BRPs and network operators (Schittekatte and Meeus, 2020). The customer segments are on one side those with a need of flexibility, and the other side consists of assets that can provide flexibility (Nodes, 2020). The latter participants connect their actual meters to register their portfolios in order to verify their delivery capacity. To be able to connect with this flexibility-providing platform, activation has to be executed through flex-contracts. See Figure 14 for the Nodes BM, synthesized by the authors.

FIGURE 14. NODES BM, SYNTHESIZED BY THE AUTHORS

5.1.2. ENERCHAIN LOCAL What signifies Ponton’s Enerchain Local marketplace solution is that it is based on a blockchain technology enabling full P2P transactions independent of third parties. It follows the over-the-counter (OTC) trading model that is fully automated and in real-time by intelligent agents and devices (Ponton, 2019). This is further described by Ponton (2019) how an Enerchain process could proceed:

Step 1: The Initiator sends an order to the other market participants.

Step 2: Market participants may fill this order. When the order is filled the Aggressor sends an Execution to the Initiator. Execution can only take place with the limits of both parties’ mutual credit limits.

Step 3: Subsequently the initiator sends back an Acknowledgement to the aggressor.

The platform can be used by microgrids participants, DSOs, aggregators and also energy suppliers as both producers and consumers receive economic benefits thanks to residual load being delivered to the public grid. Enerchain offers two different solutions for P2P trading, the first being virtual trading among members within a community and the second physically trading among neighboring households. The participants that are connected through virtual power communities share energy through agreed fixed prices while the physically connected trade through prices based on supply and demand. However, for circumstances where production is insufficient compared to demand, an energy supplier will always be required to fulfill these gaps, operating the trading platform and can

also set a min and max of prices. See full BM of Enerchain Local, synthesized by the thesis authors in Figure 15. (Ponton, 2019)

FIGURE 15. ENERCHAIN LOCAL BM, SYNTHESIZED BY THE AUTHORS

5.1.3. FED The campus-based FED project consisted of the development and implementation of a local digital marketplace connecting cooling, heating, and electricity into an integrated system. The project involved nine, inter-disciplinary parties: The City of Gothenburg, Johanneberg Science Park, Göteborg Energi, Business Region Göteborg, Ericsson, RISE Research Institutes of Sweden, Akademiska Hus, Chalmersfastigheter and Chalmers University of Technology. The software development was executed by Ericsson and their solution is built on their IoT Accelerator that enabled full automation of the marketplace between its trading agents. The participants of the market are represented by agents which place or accept bids based on its own analysis of the situation, communicated through the central marketplace, see Figure 16. To improve performance and preciseness of the agents, artificial intelligence and machine learning is implemented in some of them. The bids covering production, consumption, flexibility, are hourly-based on a 10-hour forecast which get cleared by a solver in the energy market through an optimized routine. For the pricing, the system can also consider CO2 emissions and/or primary energy. (Karlsson and Dahlgren, 2019)

FIGURE 16. FED MARKET DESIGN (FED, 2019)

The campus-based FED project was recently completed, but it is stated that further work on BM development is required. Concerns raised through this project were the question of how the role of the market operator is best fulfilled, as well as presenting a fully working price model that also reflect CO2 emissions (Karlsson and Dahlgren, 2019). See full BM of the FED project in Figure 17.

FIGURE 17. BM OF FED PROJECT DEVELOPED BY THE AUTHORS BASED ON FED (2019)

5.1.4. CORNWALL LOCAL ENERGY MARKET The Cornwall LEM was initiated by Centrica providing a virtual marketplace which empower households and businesses to buy and sell energy to the grid and the wholesale market. The platform allows buyers (the local network operator and the national grid) to place bids months before through auctions to the market. These can further be counter-offered by the participants, resulting in geographically located clearing prices. Once a participant’s offer is accepted, they will get paid and this procedure is fully automated. The process is based on a blockchain solution developed by LO3, illustrated in Figure 18 below. (Centrica, 2019)

FIGURE 18. CENTRICA BLOCKCHAIN INFOGRAPHIC (CENTRICA, 2019)

To further balance the network, participants can receive payments for reducing or delaying their consumption. So far, the project effects have realized at least 8,420 tCO2e savings that is anticipated to exceed 9,000 tCO2e by the end of the 2020 (Centrica, 2019). See full BM of the Cornwall LEM, synthesized by the thesis authors in Figure 19.

FIGURE 19. CORNWALL LOCAL ENERGY MARKET BM SYNTHESIZED BY THE AUTHORS

5.1.5. POWER LEDGER’S XGRID The xGrid solution is a part of Power Ledger’s product suite, which together creates an operating system for a new energy marketplace. xGrid is the software facilitating P2P trading of renewable energy in real-time, aiming at getting anyone located on the grid to access energy generated by solar panels. Households having excess energy could then trade solar with neighboring houses, based on their price settings. Transactions and payments are enabled by a blockchain solution, allowing increased automation, improved transparency, and lowered risk of human errors. All transactions are tracked, registered, and stored viewable on the platform. This enables consumers to choose where to buy electricity from, through simplified verification of energy sources. Noteworthy for this particular solution is the use of two digital tokens enabling synchronized transaction based on a local currency. All transactions are automatically converted between customers chosen currencies and the local currency, all reflected on the bill. This dual-token model makes the solution scalable all across the globe, ensuring consistency across the whole platform regardless of location. See Figure 20 for the full BM of xGrid, synthesized by the thesis authors. (Power Ledger, 2019)

FIGURE 20. XGRID BM SYNTHESIZED BY THE AUTHORS

Findings from Interviews

This chapter presents the empirical findings from the data collection of primary sources and are based on the compiled coding of the interviews as presented in the methodology chapter, see Table 2.

5.2.1. THE DEVELOPMENT OF CURRENT ENERGY MARKET The energy market in Sweden has for a long time been characterized by traditional and relatively conservative regulations. This, together with old premises, outdated systems, and rather low utilization levels of the distribution grid, are highlighted as aspects creating inertia for flexibility within the current energy market. The respondent working with valuation of properties highlighted the slow pace being a result of the long-term nature, where decisions made today will last for several years to come. Problem arises as a result of the rising demand, which has been relatively constant for the past 30 years, where respondents expect a drastic increase in our consumption. Energy suppliers have already noticed a capacity shortage in some urban areas, requiring either expansion of the current grid or more efficient systems with integrated flexibility solutions. Respondents within the energy industry having a regulatory perspective also declared changed circumstances and described commitments to manage it. The respondent further mentioned current investigations and assessments of the obligation to concession and regulation of electricity grids, aiming to enable efficient adjustments to new conditions. This could question whether the current regulations regarding permits for building and using electricity grids provide the electricity grid operators sufficient prerequisites to meet the demands of future energy systems. Looking at the current regulations for consumers ability to self-generate electricity, the respondent states:

“After all, there is an obligation under the Electricity Act for electricity suppliers to receive certain small-scale generation, but the problem is that there is no explicit writing today that end-users would receive compensation on reasonable terms, which we have reformulated in the proposal of our latest report” (Lawyer at the Swedish Energy Market Inspectorate, 2020)

From the perspective of the commercial valuation expert, it was considered that new smart energy solutions are emerging within the real estate sector. The respondent further argues that property owners are actively working with energy optimizations, significantly reducing costs related to energy consumption. However, to be able to incorporate more efficient solutions into the market, one of the respondents highlighted the need for improved communication among stakeholders. Both the energy and real estate industry are considered as working more isolated with innovations and new types of solutions, compared to industries such as the IT-industry. The respondent further described how competitors within IT constantly observe how the other works and inspire each other, to be able to develop the market together, emphasizing the importance for these particular markets to follow.

5.2.2. TRANSFORMATIONS A common view amongst the interviewees was that the main barriers for a transformation towards a decarbonized energy system are the conservative laws and regulations of the energy sector. One particular legislation connected to the sustainable transformation was raised by one of the interviewees to be the Sustainability Reporting which the 1600 largest companies in Sweden fall under. This legislation is a way to approach transparency and greater insight in the accuracy of companies’ sustainable impact and was raised by the respondent to create incentives for companies to promote themselves as green and the opportunity for transparency enabling platforms to offer their solutions as a value proposition to these companies.

However, a concern was expressed about the accuracy of the environmental impact laying in the hands of the Swedish energy companies, which promote themselves as delivering energy from 100 percent RESs despite any source-tracing proof. This issue was further argued to see a change in the coming years under the assumption that no energy company will be allowed to falsely promote themselves as 100 percent renewable. It was further suggested that this type of change to more transparency of energy sources can lead consumers to become more willing about switching between suppliers which at the moment can provide most renewables, that will in turn put more pressure on energy suppliers to produce more renewable energy. However, when asked about the potential of RET in Sweden, another interviewee alluded to the notion of the currently low electricity price when explaining that it is not profitable to turn to RET and assumed the system would have to build in more incentives for RET usage than existing today. Additional countering responses were raised by a couple of other respondents connected to the matter. The head of business development connected the overall decrease of capital expenditures for solar, offshore wind, and storages to driving forces of the energy transformation, as renewables now have been put on the market without the need for governmental support, which creates business cases. Despite good conditions of renewables in Sweden, one respondent pointed out that solar power will not be the solution to all energy problems.

Furthermore, a few of the interviewees also reported that the integration of renewables will result in new demands on the energy market and the distribution system to deal with the new part of intermittent power. In regard to this, the subject of flexibility was then again brought up by three of the respondents, two who raised flexible consumption as key to deal with these intermittent changes on the user level and one who pointed out from a grid owner perspective that tools for flexibility are needed to deal with the capacity shortages. The urgency of this subject was further expressed through:

“So, we feel that we are in a position where there is an actual need and one must be able to plan in order to be flexible in consumption. It is no longer just a future goal, but we are here and now.” (Head of Energy at a Real Estate Company, 2020)

This was strengthened by another respondent who expressed the importance of managing the control further out from the centralized grid as the distribution of RET is increasing. When asked about what changes of the energy system that can be anticipated, the energy expert also raised flexibility, regarding that the biggest change the Swedish system will see was expected to be the development of flex markets and procurement of flexible services and support services.

5.2.3. LOCAL ENERGY MARKETS A variety of perspectives were expressed when asking about the potential of LEM and integration of flexible solutions into the Swedish market. A common view amongst interviewees was the need for collaboration between stakeholders to be able to move towards a more flexible market design. From the energy supplier side, it is expressed:

“So, somewhere development is driven by a small future outlook and it creates opportunities for working with LEM in some way, since we must manage resources and infrastructure issues. We are in a position where we cannot do it ourselves, we need collaborative stakeholders which includes the customer perspective and also sufficient commitment from the city.” (Head of Innovation at a Swedish Energy Supplier, 2020)

Respondents also agreed on the fact that the technology enabling these solutions already exists. However, the professor within BM design highlights that technology alone cannot transform an industry, hence, a suitable BM creating value for all participants needs to be in place. One of the energy supplier respondents emphasized that energy suppliers alone cannot go through with creation of LEMs without the cooperation of stakeholders, and particularly mentioned municipalities as a vital driving force. The respondent further exemplifies how the usage of flexibility opportunities through local companies that share its heating/thermal energy, creates a great amount of value for both parties. However, another respondent expressed some split opinions regarding value creation for electricity suppliers. On the one hand, the respondent described the benefits it would entail within urban communities, with reduced load on the main grid. On the other hand, the respondent described how it could create uncertainties for energy suppliers who cannot solely rely on sparsely populated areas. From the perspective of the real estate market, one of the respondents point out the desire of property owners to expand their system boundaries geographically as a driving force for LEM development. Another aspect that was highlighted as a driving force to change, where high energy costs. According to one of the respondents, the real estate industry accounts for almost 40 percent of all energy consumption in Sweden, resulting in huge costs. Further, storage technologies are raised by several respondents as being a vital part that may enhance the opportunities for LEMs to be developed. Further, digitalization is mentioned as an additional enabler pushing on the importance of smart metering and information flow between devices since it empowers consumers to become active without extra effort. One of the respondents also expressed the importance of the role of digitalization to help optimize the use of resources, also involving the expansion of system boundaries between real estate companies, energy producers, suppliers etc.

5.2.3.1. NEW MARKET DESIGN AND NEW ROLES The importance of integrating local elements into the trading market was brought up by one respondent, highlighting the potential for local flexibility. However, the respondent raised some doubt about local markets sharing energy solely among neighbors and questioned whether there is a need for that or not. This was further emphasized by another expert on the area, meaning that a P2P model entails a sub-optimized system where benefits from central control are absent. By maintaining centralized control on a local market, there is a possibility to create a system optimized market instead of a sub-optimized market. Keeping some parts of the system centralized was also suggested to create a higher level of acceptance among participants, which otherwise is difficult to achieve when presenting a new market design. To the contrary, excluding third parties that the current market design is dependent on, was argued by other respondents to be the greatest advantage with LEM. Yet, they mentioned the difficulties that it could imply.

When discussing the energy market, there are many stakeholders involved, where one respondent highlights energy companies, real estate owners, end-users, and the city making investments. LEM would require new types of ownership, new constellations, as well as the consolidation of existing markets. The blurred lines between the different systems are also stated by multiple respondents to result in changed roles of the parties involved as completely new roles will be required to operate LEMs. Difficulties that follow are raised by the respondents, being uncertain about who takes on what role, where communication will no longer be in the hands of authorities. Several interviewees also raised the need for a new kind of market function that can operate as an aggregator, nonetheless, there was no unified vision of who or how this function would look like. When asked about aggregation in terms of platform implementation, one respondent expressed:

“So, you can say that the aggregator has a different type of role, operating and maintaining these relatively complex systems to make sure that they are optimized. Optimization can either be done based on some form of community thinking, meaning that an energy system is the community. The aggregator can also be a commercial party where you outsource the role, or it could be energy companies. But yes, I think that platforms are needed. Really.” (CTO at an Innovation Platform, 2020)

Respondents working as an electricity supplier argued that even though it needs to be a completely new role, it should be a participant who is involved in several areas of the market that takes this responsibility. To be able to integrate a system perspective, the respondent further suggested an energy company as the most suitable. On the contrary, responses from property owners indicated that the new role should not include existing energy companies. Instead, the respondent suggested a new role called Local System Operator, aggregating as a market operator to reduce the risk of becoming dependent on a leading energy supplier. This was emphasized by the director of power systems, arguing that even though the network owner plays an important role, yet not convinced if they need to be involved in a potential LEM, in terms of the trading part. Preferably, pointing out real estate

owners as the new key player of this new market design, who might otherwise face difficulties in resign control over their properties to others. When asking one of the respondents involved in the real estate industry about the potential of making property owners the key players, there was some doubt regarding properties owned by tenants' associations. Meaning that these will be challenged due to lack of competence within property management, as well as due to the absence of organizational structure and processes. While some respondents mentioned this as a way of making energy suppliers non-competitive, others argued that they will have the most important role in a future market. Even though it would imply decreased revenues, it would only last temporarily, relying on increased population and demand.

The interviewees working with regulation on the Swedish energy market mentioned that some parts in the clean energy package aim to promote energy communities, with a centralized control. This was highlighted by one respondent, being a contributor towards the development of LEM, as regulations is considered the main barrier. The proposal includes integration of aggregators, however, one of the respondents assume that these communities will not develop to be entirely decoupled from the national market. Instead, the intention is to favor a collaborative future, enabling consumers to move from a passive to an active role. This was considered a vital aspect when integrating LEM, pointed out by one of the respondents:

“These types of solutions, such as LEM, could help users to take an improved market position, moving from passive to an active role. Which I would consider as the greatest value that these solutions entail” (Electric Power System Expert, 2020)

This further emphasized by one interviewee as a vital part for the development of LEM, to reduce the distance between consumers and the market, creating an opportunity for consumers to take part on the market. What needs to be included when discussing new aggregating roles, highlighted by several interviewees, is how to adapt the existing balance responsibility. A majority of the respondents agree that a changed design is required if transforming towards more flexible and local markets. However, the question of how to make it adoptable remains unrequited. One interviewee discussed a potential approach, including new types of agreements between consumers, energy suppliers, and real estate owners. While another interviewee mentioned thoughts of taking inspiration from offerings including guarantees or insurance companies.

5.2.3.2. BARRIERS As previously mentioned, the development of LEM does come with some difficulties. Firstly, when a new type of market design arises it includes several stakeholders all having different interests of if and how it should be composed. Here, a variety of perspectives were gained through the interviews, where different views resulted in diverse visions and ideas of how to create an optimal design. One concern expressed regarding scattered interest, from respondents working with regulations, was how to decide whose interests to prioritize when it is not possible to meet them all. Meaning that when working with questions including a lot of disagreements, it needs to be the case of legislation, deciding which interest to take into account. The respondent further pointed out the reasons for having a monopoly and argued that creating a dual infrastructure would not be profitable. However, this was opposed by another interviewee, having the perspective as an electricity supplier, who questioned whether an authority working under monopoly, is the most suitable actor driving questions such as decentralization, P2P energy trading, etc. The interviewee further mentioned that it may be other participants more appropriate for such issues.

As the energy systems transform towards more decentralized distribution and shortage of capacity continues, respondents are noticing more intermittent power, higher demands on the distribution network, and decreased availability of energy. A potential outcome is argued to be fluctuating prices, where these will vary depending on high or low availability. Another respondent emphasizes this and points out that generation from renewable sources also implies lack in price dynamics, due to low marginal costs. The respondent further emphasizes the importance for consumers to be aware of the increased prices that the future will imply, meaning that it is challenging to persuade consumers into a change due to currently low market prices.

Another barrier that was brought up was by one interviewee who argued that it is not possible to only think locally to make LEMs work in Sweden. This was further strengthened by another interviewee stating the importance of breaking down the system into smaller parts, making them well-functioning independently and further, merge all parts into a comprehensive and aggregated system. The participant further emphasized collaboration as vital to make the system perspective work on a national level since small players who do not have the same prerequisites as larger companies may therefore lack behind if pioneers take the lead. Integrated participants and collaborative initiatives were further strengthened by one respondent, emphasizing the importance of including consumers already in the development. The respondent argued that a common mistake when developing a new type of solution is that the incumbent makes assumptions about what consumers want, instead of including them already in the design phase.

5.2.4. WILLINGNESS AND ACCEPTANCE AMONG STAKEHOLDERS A recurrent theme in the interviews was a sense amongst interviewees that a front-runner is required to influence companies to follow their lead in order for a transformation to gain momentum. One expressed concern by a participant was that some people within energy companies might be willing to drive a change but that their position at a company may limit their opportunities of doing so. This view was echoed by another informant who additionally expressed the urgency of preparation for a changed mental mindset within the real estate business, making the management and personnel see changes towards decentralization as realistic and doable. The need of changed mindset was stated by several respondents, where a selection of quotes could be raised:

“The obstacles are mainly in the head of property owners, where you have to prepare for them to undergo a mental movement.” (Head of Energy at a Real Estate Company, 2020)

“The real estate industry is a very slow-moving industry due to its size and long-term nature. What is being built today will last for several years to come. For the real estate companies to be able to adapt to the changing landscape, management must be open to change.” (Commercial Real Estate Valuation Expert, 2020)

The valuation expert further highlighted that real estate companies have had great results in recent years, implying higher resistance for a transformation. Rental income has increased to a greater extent than the costs, and the property market has been very favorable, resulting in high values and great profits. When all goes well, one does not focus as much on reducing costs, innovations, or new technology. However, with increased awareness and pressure from tenants, the property owners must act. It was further emphasized that the barriers do not lay with the technology, but rather in realizing how the technology can be used and connected to real estates to create value and not only see properties as passive consumers of energy. The need for a significant push for trying something new was also raised in the matter of customer behavior which one of the respondents referred to as difficult, meaning that customers may have been imprinted with a certain behavior and become convinced that it is the only way it is. An additional viewpoint connected to energy customers is the very low trust and customer satisfaction index that was mentioned by another respondent who also emphasized the opportunities of energy companies to improve this score by offering something else than just a price.

5.2.4.1. INCENTIVES OF THE ELECTRICITY MARKET When asked about opportunities connected to willingness to switch over to flexible or local markets, the responses were scattered. From the energy supplier perspective, the head of innovation describes the willingness to step out in the unknown as low and emphasize that as a reason why most companies stay within what is already known. The energy expert further highlighted that electricity companies might not be so fond of the development to more distributed sources since they may lose their revenues with the following decreased customer consumption. An additional viewpoint came from the researcher who emphasized that the energy suppliers have an important role to fill once the sun

does not shine and there is no wind. However, as they will have to run their power plants rarely, the interviewee continues that incentives for keeping their share of capacity become very low and states:

“Who would want to own that biogas-powered gas turbine that will run maybe ten times a year, every ten years, there is no one who will want to own it. It is far too great a financial risk in relation to profit” (Electric Power System Expert, 2020)

The expert instead referred to the grid operators being more interested in seeing a shift as they control the load and can then steer to the ones in actual need of the power. The lawyer expressed that the attitudes of enabling energy trading are currently opposing. The concerns of laws limiting energy trading and whether or not exemptions of the concession obligation will be allowed was therefore to be considered by weighing multiple interests against each other.

5.2.4.2. END USERS AND REAL ESTATE OWNERS The energy expert expressed his belief that end customers are stepping out of an economic rational mindset and towards a mindset that prioritizes the environment, pushing on the fact that ecological products have become preferred over cheaper non-ecological products. Opposing comments that were raised in relation to the topic of end customers was that residential tenants of real estate owners might not even bother whether or not the property has a green profile or not and that the willingness to pay an extra fee for it might be inexistent. This was also expressed to be connected to management control measures and what one values today. However, the interviewee also pointed out that office tenants might put higher demands on their property owners to have a green profile. This was further strengthened by the commercial valuation expert, emphasizing that the real estate industry is placing increased attention on the high climate impact that the sector is accountable for. There are many different environmental certifications for buildings that show how environmentally sustainable a building is, and tenants are starting to put pressure on landlords. Many tenants require that the property must be environmentally certified for them to rent certain premises. The higher awareness among tenants/companies, the more pressure is put on the property owners to build and develop environmentally friendly buildings/premises.

Taking a step back from the end customers, driving forces could instead be exemplified among real estate owners. One example was described by one of the respondents involved in the FED project, whose initiation was based on the willingness of a couple of real estate owners to expand their system boundaries from their building stock to optimize a whole community, resulting in a flexibility market project. Another respondent mentioned that real estate companies rarely go through with uneconomic intentions and that the climate benefits are spin-offs of investments made on a financial basis rather than being a part of the main purpose. This was raised when asked about the concern of investment costs of RES and the respondent further emphasized that property owners prefer fixed investment

costs that increase the property value and include variable cost savings before making investments requiring variable costs.

Investment willingness was also raised in terms of digitalization, that a system perspective of stakeholders is needed to gain momentum. This was explained due to the scattered and vertical real estate business with a high variance of control systems for different set-ups, such as elevators and ventilation, not having any coordination between them. It was then suggested that a horizontal layer needs to be added and be built on simplicity to capture these vertical elements, if traditional buildings will continue to be built. Another interviewee brought up the BM of real estate companies in regard to investments and highlighted the main value proposition to customers does not include being smart in terms of energy solutions, but to be able to provide tenants with beneficial and customized contracts. By fulfilling tenants' demand, landlords are considered as more attractive, resulting in increased market value for the real estate owner. The interviewee continued to express that an improved efficiency of energy systems could be of high value for the tenants, if there is a demand, through stating:

“Tenants might demand a smart management of properties, such as providing energy efficiency for gaining a sustainable approach. If property owners can in any way show that their activities are good for the energy system as a whole, then it is of market value for them.“ (Electric Power System Expert, 2020)

To summarize, the interviewee states that the driving force of property owners might have to come from end-users, to create an incentive for property owners to act, besides those driven by cost efficiencies.

When discussing the role of more active consumers, required for flexible markets, two of the respondents argued that technical solutions have to be more automated and accessible to gain interests from end-users for a more flexible energy market. One example that was brought up, which might result in increased interest from end-users, was to provide contracts including shifting between suppliers depending on their current renewable share. A third respondent also expressed an opinion concerning the property owners willingness in regards to automated technical solutions, and emphasized that a central node might provide all the intelligence to control the whole area of all property owners, but that then the question is raised whether or not they would be willing to let go of that control to a third party. However, this was not something that the valuation expert raised any concerns about, rather insisting that real estate owners probably are willing to let go of operational components managing energy systems as long they own data collected from external parties. Nevertheless, it was pointed out that the property owners' wants to see the financial benefits before investing large amounts of money. To further gain acceptance, providing feedback to the users on what they actually profit from the flexible solution is further suggested.

5.2.5. MARKET DESIGN AND PLATFORM IMPLEMENTATION The greatest concern about implementation of LEMs and a platform marketplace that was raised among the majority of respondents was that existing properties include several and various control systems. It was further stated that the complexity that comes with these variations make it difficult to develop commercialized solutions for the communication of buildings and its control systems. Hence, it was pushed upon from one respondent that an industrial standard is needed. Another respondent meant that a standard should not be developed too quickly without challenging different technical solutions first and that changes are required at relatively low levels in terms of infrastructure and data collection before being close to a standardized solution that could be implemented on any LEM. An agreed communication network has to be developed according to the energy expert, which can enable platforms to deliver synergies between different parties in terms of digitalization. The director of power systems also highlights the importance of creating synergies, pointing out that merging things will always imply benefits. The IoT expert further highlights the importance of having a fallback system, based on a traditional, non-optimized market system, to take control if communication and control systems turn off. The respondent further argued that the most critical parts are to maintain accessibility in the system and to make it robust, so it can handle different loads.

Further comments about the technical solutions of a platform marketplace was that when it started to be discussed in terms of energy P2P trading, blockchain became a buzzword. However, one of the respondents, who integrated a blockchain solution into their platform, now expressed blockchain as a term to avoid as it involves complexity. Furthermore, the respondent raised that there is a lack of knowledge of the technology and that it can be confused with bitcoin, a cryptocurrency requiring a huge amount of energy. The technology was also raised by a respondent who emphasized that the creation of entirely new BMs is not best executed together with new technologies, such as blockchain as the combination of BMI and technological innovation could bring too much complexity. Even though several respondents agreed on the complexity that blockchain entails, especially for centralized markets, it was considered a promising solution when having a decentralized marketplace. The IoT expert mentioned blockchain as the only technology he knew about that can solve data integrity problems of decentralized markets. However, it could also be used for centralized marketplaces as a solution that proves data of not being corrupt and modified, but that the security of data could also be solved in other more simplified ways. Theoretically, data could be stored anywhere in any type of database including APIs, but there must be reliance which does not necessarily need to be provided through a blockchain as it also can be mathematically provided. The head of business development further questioned the purpose of having a decentralized database while keeping a central operator, in relation to the expectations put on blockchain as it whole promise to remove dependence of third parties:

“In the end, peoples’ hope of blockchain is that it can take away the middleman. But the more people that have started working with blockchain solutions from a business side, they have realized that you still need a company responsible and manage the blockchain.” (Head of Business Development at an Energy Company, 2020)

The respondent further mentioned that the type of technology is less important in relation to the solution as a whole. One interviewee expressed concerns that competition amongst platform developers is starting to grow and that the forefront will consist of solutions which can deliver most efficiency in terms of communication and integration between systems. Nonetheless, the interviewee also highlighted that the effort needed in enabling such efficiency should not be underestimated. Additional advantages can also be gained through the user interface which was raised by a few respondents to be important to simplify users experience and prevent the platform from being experienced as difficult and complex to monitor. In regard to user experience, a couple of respondents mentioned the importance of automated solutions in terms of both user acceptance but also for achieving proper time resolution.

Analysis & Discussion

The inter-disciplinary interviews with a wide range of areas of expertise captured various perspectives of the development of LEMs and platforms. These will be analyzed and discussed in this chapter in relation to the literature based on the theoretical framework of this study aiming to address the research questions. Firstly, the findings will be analyzed towards implications of developing a business model design. Secondly, implementation of an energy trading platform will be discussed in regard to market design and input from respondents. Lastly, the aspect of willingness will be outlined in terms of the LEM as a part of the energy transition which will make out the base of a stakeholder analysis and mapping.

6. Analysis and Discussion

Business Model Canvas applied for the Energy Transition

In the following section, the previously addressed framework, integrating the MLP with BM theories, will make out the base of an analysis of how a BMC for an MSP could be designed. The following discussion, opposing theories with empirical findings, will form a baseline of implications towards successfully implement digital platforms in practice.

6.1.1. INTRODUCING PLATFORM BUSINESS MODELS TOWARDS ENERGY TRANSITION The most central components of the BM concept were highlighted in the literature review, being represented by the value proposition, more specific, how value is created, captured, and delivered (Geissdoerfer et al., 2018; Osterwalder et al., 2010; Richardson, 2008; Zott et al., 2011). The need for new value propositions, adapted to the ever-changing energy market landscape, was brought up both in the empirical findings as well as in the literature (Richter, 2012). Also, a changing legislative landscape, such as new obligations of companies to report their sustainability impact can be considered a driving force for more transparent and environmentally friendly solutions. The traditional energy system was considered holding authority over passive consumers (Oh et al., 2017). With the increasing share of RESs resulting in more distributed production, findings from the empirics pointed out that more active consumers are needed. Outdated systems, low utilization levels of the distribution grid together with capacity shortage, were highlighted by the respondents requiring changed structures for the energy system as well as the integration of more flexibility. This agrees with the report by Siemens (2019) stating future opportunities in regard to the energy system transition to be connected to the challenges of handling flexibility and data. It was further exemplified in the empirics how the usage of flexibility creates value for several parties involved in the energy market.

Based on the need for a changed system, adapted to consumers stepping out of a passive demand- side along with the innovation of more flexible solutions, new value propositions through BMs have emerged. Findings from the literature raise the rapidly emergent digitalization in combination with urban development as an enabler of new BMs, creating a new paradigm of ‘digital business’ (Di Silvestre et al., 2018). Both previous research and respondents underline that there will be a need for both new roles and for existing roles to take new forms to handle flexibility. A vital part that needs to be developed is a marketplace to advance towards a decentralized and two-way energy system, where platform BMs have gotten a lot of attention (Siemens, 2019). A more bottom-up approach involves reorganized infrastructure, facilitating an open and participative sphere where it seems that a platform is the main enabler. Also, the introduction of platforms enabling energy trading on an end- user level will require BMI efforts for incumbents of the market to adapt accordingly. The adaption of incumbents could be seen as a pathway for a transition on a regime level. The findings suggest that it provides the infrastructure for all interactions, entailing simplified value creation and synergies.

6.1.2. VALUE PROPOSITION AND CAPTURE When applying the concept of BMC to MSPs, consisting of two or more distinct but interdependent groups of customers, the framework needs to be synthesized to include all customer segments involving adapted value propositions (Osterwalder et al., 2010). Applying digital platforms within the energy sector implies new ways of delivering value to traditional incumbents, which can be considered a niche system as it provides new solutions supporting socio-technical transitions (Wainstein and Bumpus, 2016). From the successful companies AirBnB or Uber it can be seen that digital platforms have a strong potential of disrupting traditional sectors and that there is an interest of consumers to take part in a shared economy.

The empirical study of applications and interviews established an overview of different suggested value propositions of an energy market platform. The customer segments of the application BMs consisted of multiple parties which were synthesized into two segments considered having common value propositions. For example, consumers, prosumers, and households were merged into one category, based on all being end-users. This resulted in two corresponding value propositions for each application, which the platform is responsible for delivering to each customer segment which in turn produces an associated revenue stream. The findings from the applications showed some essential similarities regarding value propositions, all providing a digital marketplace favoring flexibility and energy efficiency. Three of the applications, Enerchain, Cornwall LEM, and Power Ledger, are platforms offering P2P trading while other flexible solutions are provided by Nodes and FED. Fundamental for Nodes is the integration into the existing market, while operating independently from any market party. They provide both energy and flexibility trading through personal and automated contact. FED is a centralized marketplace aiming to reduce the costs of the project community.

When comparing the findings from the applications with empirics from interviews, some parts were strengthened while others brought new perspectives to be added. Depending on what customer segment the platform aims to include, the value proposition changes accordingly to make BMs successfully implemented in practice. When discussing the value creation with flexibility markets for included participants, mainly real estate owners, energy suppliers, and end-users were brought up. The value proposition for real estate owners could be suggested based on findings from the interviews, highlighting the interests of reducing costs from energy consumption. However, another aspect that was mentioned to be a potential value proposition for real estate owners was increased transparency and renewable accuracy that could help prove real estate owners' sustainability efforts. As pointed out in the empirical findings, the higher awareness among tenants, the more incentives are obtained by real estate owners to find greener and more environmentally friendly value propositions. Looking at the value proposition for energy suppliers, flexibility markets could be assumed to be a solution filling the gaps of sufficiently managing distributed energy generation. The current market is characterized by an increasing capacity shortage, indicating the need for further electricity generation, meanwhile, an increased share of RESs implies variations requiring new ways of balancing the market.

6.1.3. VALUE CREATION What can be a common characteristic of MSPs is the key activities and resources being mainly about the platform itself and the management of it. Whenever a building block of the BMC could not be found in the application reports, the characteristics suggested by Osterwalder et. (2010) was used instead. Assumptions could be made regarding the cost structure, where both the key activities and resources of the platform are directly linked to that parameter. This resulted in similar costs structures for a majority of the applications, being costs that comes with the activities of running the platform. However, some of the applications selected for the empirical part of this study have purchased their technical solution from third parties which expands key resources and key partners from being only internal, including changed cost structure. Others used technologies developed either by the particular company owning the project, or by the project stakeholders themselves. The main activities for the majority of the applications consist of platform management as well as connecting appropriate parties. Since the platform links customers, these activities directly impact the customer relationships, which could either be through automated or manual communication. However, key activities for FED differed to some extent, all being automatic and focused on forecasting of the market, including production, weather as well as energy and power use. The gathered data is further used to analyze market situations where bids are hourly-based on a 10-hour forecast. The main benefit using automatic systems is highlighted in the literature, making the processes more time-efficient and allowing cost saving (Parida et al., 2019). Findings from interviews also suggested automated systems to successfully involve end-users, arguing that it plays a crucial part in whether getting their interest in flexibility markets or not. The Cornwall LEM uses a combination of manual and automated functionalities where the trading is auction-based allowing manual bids and counteroffers while the accepted offers are paid automatically. Integrating end-users in the processes to an extent which requires their extra effort, as in the Cornwall project, could imply both advantages and disadvantages. From the empirical findings, respondents questioned whether to put responsibility on an individual level, as it might require both time and effort. However, the engagement of customers is vital in the transition from the niche level towards regime. Especially being relevant for the first sub-process of the MLP framework, where collective understanding among actors is in focus (Bidmon and Knab, 2018). It could be argued that end-user’s inclusion as well as a BM acting as a communication channel could contribute to this development.

The involvement of all participants affiliated to each side of the platform, is also a vital part to accomplish the introduction of platforms aimed for new market design, as an MSP grows in value with the number of users it attracts, called the network effect (Osterwalder et al., 2010; Stummer et al., 2018). This can be considered a driving force of diffusion assisting niches to enter the regime level. However, it is stated in the literature that commercialized BMs will be required before achieving a breakthrough. Further, the chicken-and-egg dilemma is a common challenge for MSP to overcome in order to be able to reach network effects. One approach that can minimize the challenge is to make evaluations of price sensitivity of the customer segment and decide on subsidizing one side of the platform to attract users on the other side. This evaluation of revenue streams and exploiting subsidizing was not raised within the empirical research, however, it should be considered as a vital part to take into account. It was seen from the application cases that revenue streams were either based on periodic participation fees or as a single cost in terms of a license fee. The empirics

showed that real estate owners, which make up a large part of the customer segments, prefer fixed investment costs that results in reduced variable costs which is the main value proposition of this platform solution.

Market Design for Energy Trading Platforms

This section will incorporate the empirical findings and literature regarding market design and implementation towards forming practical implications of a digital platform enabling energy trading. Previous literature within the field of energy trading uses somewhat scattered denominations regarding market designs and its components. The same set-ups were found to be defined differently and variation in how researchers and respondents divided these into categories was noticed. However, these will be presented and compared to identify a suitable market design for a commercialized digital platform.

6.2.1. MARKET DESIGN SET-UPS As stated in the introduction, the diffusion of DERs has evolved without a proper market design functioning as a flexibility management system that can handle the variabilities and uncertainties that are included in renewables reliance. Regarding LEMs, findings derived both from the literature and empirical research underline that a market design varies depending on the particular set-up and configuration of participants, power systems, and the objective of the different actors (Ampatzis et al., 2014). This combination of findings provides some support for the conceptual premise that it might be difficult to find the best solution applicable on a commercial level and successfully go from a niche innovation level and reach the regime level. Further, Koirala et al., (2016) also underline the variation of individual cases involving difficulties in developing a generalizable approach. A market platform is formed by the market players, pricing mechanism, and market-clearing (Teotia and Bhakar, 2014), which are all parameters that can be configured in various ways, resulting in a wide range of market set-ups. To explain different set-ups, one of the respondents from the empirics illustrated market designs in a range where P2P markets constitute one extreme end, and centralized markets the other end. The traditional conventional market set-up has a centralized control system excluding end-user participance, why it can be discussed, as one of the respondents raised whether it actually can be considered a market. On the contrary, in a totally decentralized set-up such as P2P, end-users participate directly creating a two-way flow of the market. With the introduction of aggregators, concepts integrating these roles with LEMs have emerged in between the two extreme cases (Menniti et al., 2007; Morstyn et al., 2018; Olivella-Rosell et al., 2018). Additionally, the matter of trading comes with deciding between the two additional distinct prosumer markets designs, other than P2P as presented in Figure 4, integrating the main grid through either prosumer-to-grid or prosumer community groups.

It was found from the empirical research of existing applications that Enerchain Local and Power Ledger’s xGrid offers the opportunity of P2P trading where transactions are independent from third parties through blockchain solutions. Existing literature pushed upon the novelty of P2P trading research but still underlined its potential of providing characteristics, such as high efficiency, flexibility and dynamicity that the energy sector is in need of (Jogunola et al., 2017). A market design consisting of pure P2P trading can truly empower consumers to become active as their choice of electricity use becomes democratized. However, it was also discussed among interviewees whether pure P2P trading only between neighbors, is a beneficial approach due to limited weather conditions. Considering this, P2P markets can put the guarantee of energy delivery at risk as they are decoupled

from the main grid. Looking at the current market, solar power generation is the main RET in use for prosumer production. From the empirical findings it was pointed out that solar power solely will not be sufficient enough to supply LEMs. This indicates that prosumer production needs to be supplemented with additional energy sources. P2P models were further argued to create sub- optimized systems, where respondents highlighted benefits with keeping some parts of the system centralized to gain a system optimized market.

An approach of keeping the control system centralized, while also integrating aggregators was suggested by the literature to be the design of VPPs (Morstyn et al., 2018). This allows for common communication and control of power among a community despite there being no physical common infrastructure. This can be considered a more economically beneficial market design rather than physical connections which involves infrastructure investment costs. However, it should also be considered whether this solution still will imply double subscriptions for the VPP subscribers. One of the applications entirely based on a VPP is the Cornwall LEM, enabling participants to sell or buy energy both to the grid and the wholesale market. Also, one part of the Enerchain Local solution offers virtual trading but instead only between community members, based on an agreed fixed price.

To capture both the value offered by VPPs and P2P trading, both findings from interviews and literature proposed the concept of FPPs. These could either operate in an islanded mode, where all energy consumed is generated by the community itself or connected to the main grid. When applying the concept to the Swedish energy market, respondents argued that it will not be beneficial to only think locally, rather take advantage of synergies with the current infrastructure. This system thinking is strengthened by Brown (2019), arguing that BMs that address end-users are more likely to succeed when delivering value to the wider system as well. One application that adopted this approach was the FED project, using a central marketplace aggregating a decentralized market. This is emphasized in the literature as bringing advantages to end-users, having a central market player aiming to maximize utility for the entire community (Menniti et al., 2007). Further, the FED marketplace is built on automated communication between agents that represent each market participant and have the function of placing or accepting bids. This is based continuous trading which is also used by all other application cases except for the solution for the Cornwall LEM, which is auction-based on monthly bids. The main differences between the cases of continuous trading is that they happen either in real-time (Enerchain, Power Ledger), on an Intraday timeframe (Nodes) or on an hourly-based (FED). Continued trading is per its definition pay-as-bid, while auction-based trading can be done through pay-as-clear. When analyzing which market clearing to be preferred, it can on the one hand be underlined that auction-based trading can provide long-term planning which might result in better coordination and more efficient distribution of flexibility. On the other hand, RES includes uncertainties making generation difficult to guarantee. In a market where demand constantly varies with time and geographical area, it could also be difficult to foresee needs, where continuous trading can be considered beneficial as it matches demand frequently.

6.2.2. TECHNICAL IMPLEMENTATION To operate a LEM that can provide flexibility, there is a need for installed controllers and storage devices connected to a control system (Bremdal et al., 2017). In regard to this, several of the interviewees underlined that the buildings of the real estate sector constitute of a high variance of control systems that also are most often outdated. The lack of smart meters and great variances of current systems can be considered a barrier where investments in new types of control systems are necessary to create consistency. The reliance of smart metering communication becomes even more important if trading solutions are automated. The FED project interviewees exemplified this type of investment where they involved the control system suppliers for upgrading the systems of the participant buildings to enable communication optimization. For the matter of communication between devices, the aspect of communication between stakeholders should also be raised as the empirics reveal that both the energy and real estate industry are innovating in an isolated mode. Improvement of communication between stakeholders might lead to less scattered variations of systems, decreasing the barriers to scalable platform solutions and therefore also to a regime entrance. Data collection is the most central element of the platform BM, making out the entire businesses of platforms that can create advantages over competitors (Kenney and Zysman, 2016). The data is already available digitally, but has to be continuously read and managed in terms of power supply and load balance etc. From the empirical findings, two options can be derived to overcome obstacles of the ICT infrastructure, to either consolidate systems or investigate in an industry standard of how to read the data exchanges. Additional important viewpoints to have in mind are the critical parts of maintaining accessibility in the system and to make it robust, so it survives different loads.

To achieve a transparent and secure LEM trading platform, information and communication technologies are the key components of the system. Based on the empirical findings, the degree of decentralized control which was discussed in terms of market design in the previous sub-chapter also has to be considered regarding the technical development of a platform. From the perspective of secure transactions, blockchain appeared from the empirical findings to be the most suggested solution. It was even raised by the IoT expert, without having investigated it further, that blockchain was the single known solver of data integrity for decentralized markets that the respondent was aware of. However, as stated by one respondent, blockchain is yet immature in this context of application which would, in this case, combined with BM innovation risk to include too much complexity. It was also interesting to note that despite blockchain being a popular technical solution in the application cases, the experts in IoT and business development raise it to be more of a buzzword than it actually might deserve. However, the fading hype can be seen as beneficial in terms of that it could lead to a more practical evaluation of the technology. Instead of locking into a solution solely based on word- of-mouth arguments. Its advantages can be recognized as data management without third party interference. Additionally, the explored applications exemplify virtual or physical layers which are approaches that need to be decided between based on the particular market design. Parameters to be considered can for example be geographically barriers to investments in new local grid infrastructure or regulations that obstruct connection between buildings, as the current situation in Sweden. The blockchain technology was applied on two virtual systems out of three applications utilizing the technology.

Not only the choices and implementation of the platform back-end is vital for the platform commercialization, also the importance of the front-end development of simple user interfaces got a lot of attention from the empirical findings. It was highlighted by pointing out the importance of including consumers already in the development phase. Therefore, aspects and requirements from an end-user perspective gained from the findings will be particularly considered when suggesting practical implementations. It is through the interface the value of transparency is actually delivered, why it is important to be implemented in such a way that it directly indicates simplicity over complexity, making it look inviting. For the user interface development, the degree of centralized control is also a decisive parameter regarding who the platform users may be whether the role of a market operator is taken by a third party or not. If the market design has a centralized control with an aggregator as the market operator or if the users themselves are the operators in the case of a P2P market design might require some differences of the design where simplicity might be more relevant for the latter design. In regard to commercialization it should perhaps also be anticipated that there might exist different needs for different geographical areas, where for example members of a LEM will have to rely on each other mutually. This indicates that a commercialized user interface can be difficult to develop and adaptation to specific users should be considered.

Stakeholder Acceptance of a LEM Transition

When a new market emerges within a relatively conservative sector, such as the energy sector, it can be difficult to get all incumbents on the pathway of transitioning. The socio-technical landscape of the electricity sector has for a long time created a lock-in of the current regime. However, the EU Clean Energy Package creates windows of opportunities for novelties such as aggregating roles in the existing regime. An analysis towards a stakeholder mapping to switch over to flexible LEM will be provided in this section, while also highlighting the issues and opportunities in regard to the roles and willingness of these stakeholders.

Several choices and features need to be considered when developing and forming a new market design. New types of ownerships, usage, and constellations require new roles of the electricity system enabling a LEM. Furthermore, the design of the market needs to be customized depending on the local power system, characteristics of market participants, and objectives of the actors (Ampatzis et al., 2014), including prosumers, consumers, suppliers, market operators, aggregators, etc. The empirical findings also showed that blurred lines between systems require a changed structure for responsibility and operating parts. Uncertainties were expressed regarding who takes on what role when authorities are excluded to a greater extent. However, one aspect that all interviewees agreed on, was the centrality of consumer involvement as addressed in the technical implementation section.

6.3.1. WILLINGNESS AS A DRIVER As previously mentioned, the inclusion of consumers plays a fundamental role in the transition toward this changed market structure as it requires active participants to create a resilient two-way flow (Wainstein and Bumpus, 2016). This results in stakeholder willingness and acceptance being crucial for development and depending on outcome could either favor or disfavor the adoption. What should be pointed out is that depending on who the platform is targeting the definition of consumers or end-users could vary. It will be further discussed how willingness and acceptance could differ among participants by exploring different alternatives, and further analyze what might be most beneficial for this particular study. For example, when looking at a property with office tenants, will it be the real estate owner acting as a driver for transformation, or the tenants? Similarly, when looking at residential buildings, investigating whether it will be the people living in the apartments, the tenant’s association, or a combination of both. Differences of willingness within these segments were identified from the empirical findings. Firstly, the willingness of investments was a recurring topic, as well as the discussion considering which stakeholder that should take on the investment cost. It was brought up that stakeholders risking reduced revenues due to decreased customer consumption, might have lowered willingness for investing. Instead, identifying a greater willingness among grid operators, being more interested in seeing a shift as they control the load, and can then steer to the ones in actual need of the power. Further, increased investments in more efficient energy solutions could be found among real estate owners, seeing the potential of lowered operational costs, and to keep up with the development, otherwise risking falling behind.

Another concern that was raised regarding this, was that residents might not be as willing to pay any additional costs for a green profiled property, while it could be a crucial aspect for an office tenant when deciding to rent the premise or not. This indicates that from a perspective of the level of “good will”, office tenants could be considered as stronger drivers than residents, putting more pressure on landlords. The need for a push from users when creating something new, was raised in the interviews as being difficult when customers are imprinted with a certain behavior and will therefore not be questioning current strategies. This was also mentioned as a potential reason for companies within the energy sector showing resistance to stepping out in the unknown. Overall, from the empirical findings it was found to be one of the main challenges that the introduction of LEMs needs to overcome. Dominant practices, structure, and culture characterize both the energy and real estate industry, requiring a change in the mental mindset to make personnel and management see a transformation as both doable and realistic.

Difficulties regarding user acceptance and willingness that might occur with the development of LEM could be argued partly overcome when offering it through a platform. The literature highlights how platform businesses offer additional value-streams beyond technical and economic advantages, namely uncertainty reduction and preference satisfaction (Morstyn et al., 2018). As previously discussed, RET entails some uncertainties among both suppliers and end-users due to variations in generation and prices, which could be a reason for decreased willingness among participants. However, when using a platform and applying it for a LEM, participants could share information and risk, reducing uncertainties. Additionally, through more integrated consumers affiliated to the platform, a higher degree of transparency could be offered, providing an overview of generation, consumption, and storage, which was argued in the literature increasing preference satisfaction (Boait et al., 2017). Looking at the current market in Sweden, it was stated in the interviews that customers in general experience very low trust and satisfaction towards energy companies. This could either be interpreted as the consumer's willingness for a transition increases due to dissatisfaction, or it could, on the contrary, result in barriers where users are not willing to participate. However, changing behavior among consumers was already noticed by interviewees, emphasizing that end customers are stepping out of an economic rationale mindset and towards a mindset that prioritizes the environment. Taking a step back from the users of the platform, willingness among regulatory authorities seems to increase. When looking at newly proposed directives and regulations, these are beneficial for development towards more flexible solutions and markets. This, together with increasing pressure from the EU, resulting in continued progression for transitioning.

6.3.2. RESTRUCTURING ROLES WITHIN NEW MARKET DESIGNS Interesting findings concerning changes in roles and introductions of new ones could be derived from the inter-disciplinary respondents. An essential role for LEMs will be the market operator, responsible for the market set-up managing several tasks such as clearing and transaction management (Bremdal et al., 2017). Various perspectives could be found in the empirical findings, where respondents having different roles on the current market brought some scattered arguments. After all, this was rather expected due to stakeholders that currently holds a strong position might not see as much potential with changed market structure as others who would be more favored. When discussing which actor was most suitable taking on the role as a market operator and whether it should be a third party or not, there was not any unified vision expressed. Suggestions were brought up that it should be a completely new stakeholder, involved in several areas of the market, while others mentioned real estate owners as most suitable. Some argued that energy companies would be most appropriate, while others emphasized that they should not be included at all. What needs to be in mind when deciding on a market operator, is the level of integration of the market into the existing market (Schittekatte and Meeus, 2020). If an energy company or network operator, such as an DSO or TSO, would take on the role of the market operator, the market would continue to be running in a monopolistic manner. This would result in a platform still partly integrated to the existing market, considered as the most probable scenario looking only at current governmental regulations together with those commitments that are currently being investigated. However, the literature highlights the independence of the operator from market activities being crucial to ensure transparency and neutrality between buyers and sellers (Stanley et al., 2019; Schittekatte and Meeus, 2020). Based on that, the argument for using a completely new and independent stakeholder is strengthened. Nevertheless, due to DSO being a monopoly party, flexible trading of electricity to end-users is not allowed, requiring adjusted regulation (Eid et al., 2016). However, some of the respondents were uncertain if real estate owners would be willing to let go of any operating parts of their systems, in that case it would imply that they are the only alternative for the role. On the other hand, it was also argued that as long as real estate owners own all data generated from the system by a third party, this will probably not be an issue. Instead, this could be one way for real estate owners to expand their system boundaries, from properties to optimize entire communities. Lastly, it was suggested to integrate a new role called Local System Operator, aggregating as a market operator to reduce the risk of becoming dependent on a leading energy supplier. This role was a recurrent topic among the interview participants which could be equalized with the newly introduced role of an integrated aggregator.

An aggregator could function in different ways and the empirical findings emphasized some main objectives being to optimize the market, enabling flexibility, and balance consumption to reduce costs. From the literature it was further highlighted that the integration of aggregators enables centrally based decisions (Olivella-Rosell et al., 2018), which was argued by respondents being beneficial due to decisions being based on advantages for the entire community instead of individual participants. This was also emphasized in the literature, increasing trust and acceptance among consumers/prosumers, allowing the market to balance their requirements together as a community (Morstyn et al., 2018). Due to RET implies uncertainties regarding high variation and price fluctuations (Zhang et al., 2018), centrally made decisions could increase preference satisfaction,

where end-users share information and risks collectively. Additionally, when discussing end-user acceptance, it was considered to increase if keeping some parts of the system centralized. According to Brown (2019), prosumers value simplicity rather than control over the electricity system. This indicates the importance of user interface, which is further strengthened from the interviews, mentioning the advantages with simplified user experience preventing the platform from being experienced as difficult and complex to monitor.

A highly relevant aspect to discuss when investigating the integration of new aggregating roles as well as a new market design, is the adaption of the existing balance responsibility. In the current Swedish market, the authority and government agency Svenska kraftnät (TSO), are responsible for balancing the entire electricity system. The implementation of new types of local markets, partly generating its own electricity, would require changes to existing structure. This would mean that companies accountable to ensure maintained balance within each geographical area, as well as electricity suppliers ensuring that sufficient electricity is produced to meet daily demand, faces changed conditions. It could imply unforeseen demand from end-users partly relying on self- sufficiency, making it difficult for authorities to predict energy consumption and plan for both generation and imports. From the applications it was found that both Nodes and FED used BRPs to manage imbalances. These could either be integrated as a market player to the market design, or explicitly integrated as a third party. A potential approach was found in the empirics, including agreements among consumers, energy suppliers, and real estate owners, where the adapted responsibilities are formulated with inspiration from guarantee and insurance companies. Another alternative that was suggested from the empirics was to make the aggregator economically responsible for all imbalances that occur due to this new integrated role. This would be enabled through contracts between both parties, where the actor operating the aggregator compensates the electricity supplier for reduced electricity generation.

Market Design and Business Model Concept

Based on the implications raised in the analysis and discussions in the previous sections, this section will provide a further outline of suggestions based on recommendations and assumptions for designing a BM, see Figure 21, along with corresponding market design, see Figure 22 and Figure 23. These are intended to be applicable to LEMs including a digital marketplace, as the particular case described in the introduction where the platform is the key resource. In the context of this work, a local market is assumed to consist of prosumers, consumers (customer segment one) electricity suppliers (customer segment two), and a market operator, being the actual platform, handling the customer relationships. What should be pointed out is that the first customer segment, segment one, could vary in whom it is targeting, however, all cases refer to the user side of the platform. It includes households when aiming for a housing area, and to real estate owners in the cases of office building, residential buildings, as well as industries. These can also make up the two sides of the platform when trading electricity on the prosumer level. The value proposition remains unchanged as it will include energy and cost efficiencies for all users. The value proposition of the second customer segment involves the market at a higher level, being able to balance the market and always have sufficient capacity.

FIGURE 21. SUGGESTED BUSINESS MODEL DESIGN

Customer relationships could either be managed automatically or manually. An automated solution could be considered for circumstances requiring time-efficiency as well as cost savings. Manual solutions require stakeholder-effort to some extent and can, therefore, be seen as more complex resulting in parties disregard participating on the platform. A combination can be contemplated by keeping advantages from both strategies, as discussed in the previous sub-chapter. The proposed market design includes an aggregator, which will be the receiver of the participant data and functions as an independent party, why no network of key partners is needed. The key activities are based on the assumption of Osterwalder et al., (2010) following the pattern of most MSPs, being platform

management with additional characteristics of an electricity marketplace of aggregating and operating. These activities make up the cost structure building block of the BMC. The revenue streams are based on periodic participation fees from both customer segments, where also the subsidy part of the cost structure is recommended to be carefully evaluated in relation to the customer segments. The customer touchpoints are all channeled by the platform marketplace.

Parts of the software development of the platform are suggested to include a blockchain solution, to secure data integrity and increase user acceptance. The ownership of the data will not require changes as real estate owners and other participants still own all data generated from their systems. Through such an agreement, the aggregator and the market operator could access the data from the participants whose willingness expectedly increases with confidentiality. Suggestively, data exchange and transactions should happen as near real-time as possible e.g. on an hourly basis, to manage variations in the generation, increase utilization of existing resources, and gain sustainable development.

The main objective of the proposed market design, see Figure 22, is to serve as a basis to bring forward flexibility available from prosumers and their controllable demand and supply arrangement, including RET 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, while, at the same time functioning as reserve storage towards the main grid, reducing the risk of capacity shortage. To do so, mechanisms are further introduced which economically-efficiently secures the prosumers’ flexibility.

FIGURE 22. LEM CONNECTED TO THE PLATFORM

To capture the advantages offered by both P2P markets, VPPs, and from a totally centralized market, the concept of FPPs will be adapted. Due to uncertainties whether RET will be sufficient enough in terms of electricity generation and the avoidance of dual grid infrastructure, the market is suggested to be connected to the main grid, utilizing benefits of synergies with the current infrastructure, see Figure 23. By connecting the LEM to the main grid, electricity suppliers could supply the deficit, ensuring sufficient generation. As discussed in the previous chapter, it is not considered being beneficial to only think locally, instead, the potential to succeed with the integration increases when delivering value to the wider system as well. Through this approach, LEM could be considered un- locking flexibility of the wholesale market, to cover capacity shortages coming from urbanization effects. Further, a partly centralized marketplace is suggested, operated by an aggregator to enable a system optimized LEM. The aggregator manages flexibility through ICT solutions within the geographically defined area, responsible for collecting offers from participants such as prosumers and consumers. All data is further stored and transferred to the local market operator, being the intermediary between the local market and the main grid as well as function as the market BRP. Assuming that all parties are equipped with smart metering devices, the market operator receives electricity profiles including demand and supply status and offers from both the aggregator as well as from the electricity suppliers. The market operator further analyzes each scenario, determines how to coordinate transactions, and clears the market. Coordination is executed based on balancing mechanisms, to gain benefits for the whole community, and information regarding the action is lastly communicated back to both parties. This solution addresses the willingness and acceptance analysis, where it was raised that LEM participants prefer sharing risk and information commonly.

FIGURE 23. LEM AND CONVENTIONAL GRID CONNECTED TO THE PLATFORM

Conclusion & Practical Implications

This chapter raises the main implications from the analysis and discussion to provide an answer to the main research question:

What business model design is suitable for a digital platform enabling Local Energy Markets?

7. Conclusion & Managerial Implication

Main Findings & Practical Implications

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 BM linking new technology to the emerging market needs to be defined. Hence, this study was undertaken to investigate what BM design could be suitable, enabling LEMs aiming to manage the extensive diffusion of DERs. The purpose of the study followed an explorative approach, meaning that the study aimed for a broader understanding of the research area, rather than providing a final and conclusive answer to the research question, including a comparison between theories, emergent concepts, and applications. The results from the evaluation of implications for a marketplace and its implementation have shown that several aspects need to be considered. The insights gained from this study may be of assistance to different parties that are exploring similar opportunities of LEM development, such as the case described in the introduction.

When implementing a LEM, this study recommends starting with designing a BMC where all building blocks need to be carefully defined. In this study, the application and implementation of MSPs have been applied to make out the key resource to channel and provide customer relationships with the intended customer segments of the electricity system. The different sides of the platform have to be well-thought-out in regard to the customer segments. Once a solid ground of the BMC has been established, the development of a market design can be commenced based on the BM building blocks in order to deliver the value propositions developed. For the determination of a LEM, the design parameters presented in Figure 24 need to be considered. Based on these parameters, a suggested market design is presented in the previous chapter, 6.4 Market Design and Business Model Concept. The figure below illustrates a span between the extreme points of each parameter where the market set-up can be based on the degree of choice within these different spans. For the particular figure, a physical marketplace with conventional energy trading, centralized market control, and manual market communication is shown.

FIGURE 24. VITAL PARAMETERS OF A MARKET SET-UP

This study has found that a suitable market design that creates, captures, and delivers value to a LEM should include the set-up of an FPP. This concept consists of the integration of aggregators into a

LEM, resulting in a partly centralized marketplace. The suggested market design includes the introduction of both changed and completely new roles, containing prosumers, consumers, electricity suppliers, an aggregator, and lastly a market operator. The role of the market operator will include having the responsibility as a BRP, where this study argues that it should be a completely new role, taken by a stakeholder independent of the current Swedish electricity market to ensure transparency and neutrality between involved parties. This market set-up enables centralized decisions made by the market operator, all supervised by the aggregator to gain a system optimized solution, benefit the market as an entire community. The market is suggested to be connected to the main grid, functioning as reserve storage, helping to balance the electricity system, and reduce the risk of capacity shortage in exposed areas in Sweden. This study has also shown that the platform could gain advantages through integrating blockchain technology, securing data integrity, and to increase user acceptance. Lastly, data exchange and transactions are suggested to be executed in as near real-time as possible, for example, on an hourly basis, to manage variations in the generation, increase utilization of existing resources, and gain sustainable development. This proposal should help to improve predictions of the impact of technical, economical, and environmental effects, through having a three- layered approach. It further addressed sustainability concerns, focusing on flexibility management within the electricity system which has provided insights into the most suited market operation for optimization. Additional insights are raised that can be helpful in the evaluation of utilizing flexibility energy assets before making grid investments, following the recommendation of the EU's Clean Energy package.

Theoretical Contribution

After a mixed-method approach, a clearer overview of the existing research within the area of LEM has been gained. Despite the novelty of the research field of LEMs, the aim of investigating BM designs for a LEM platform has been reached through integrating theories from several fields. Firstly, this study contributes to the rapidly expanding field of literature that links BMs with socio-technical transitions enhancing the understanding of the need to shift towards sustainable development. While previous studies have been performed in a wider context of the energy transition through an MLP combined with BM theory (Wainstein and Bumpus, 2016), this study contributes to a new dimension by studying a particular field of the transition in terms of flexibility market platforms. More specifically, how the BMC for MSP can be used as a facilitator for niche innovations to become commercialized to break through the regime level and reach a transition.

Secondly, the theoretical implications of the study concerning an MSP marketplace address how to leverage digitization opportunities within the energy sector to achieve sustainability advantages. A lack of approaches in previous literature was found, regarding how to transform theories into practical implementation. To be able to make national climate targets reachable, an extensive diffusion of DERs are needed and expected to change the existing structure, why these findings can be highly relevant to propose an appropriate BM as well as market design. This study contributes to this gap, by suggesting the most vital parameters to take into account when designing a LEM. Additionally, combining theories from the emerging field of digital platforms with literature concerning energy trading, and through an evaluation of existing applications, contributed with a deeper understanding of the relatively unexplored field of the implementation of energy trading into smaller local markets.

Limitations and Future Research

As this work signifies an industry problem rather than a company-specific problem, concerning the decarbonization, decentralization, and digitalization of the electricity sector, the suggestions provided from this study might not be a solution that can be applied on a general basis. To successfully reach a transition towards the regime level, an extension of the system boundaries of incumbents is further required to be standardized and commercialized to accelerate the pathway. Additional considerations to take into account which can be vital for the commercialization of the platform are the willingness of all participants, where it can be suggested to involve users already in the development phase which require some further research and user studies. The generalizability of the results concluded in previous sections is subject to certain limitations. The methodological rigor of this case study could be criticized due to its exploratory characteristics of the early phase of digital platforms within the energy sector, being carried out by interactions with real situations and practitioners. For instance, the empirical findings are to a large extent based on semi-structured interviews that are by definition difficult to replicate. Additionally, the application findings were presented based on the latest available information which will most probably change over time as all projects and companies are still in their development phase. The implications of the study were limited to only be based on theoretical and empirical findings whereas practical implementations remain for future research. As a BM and market design involve several points to consider for an MSP gaining network effects, a proper implementation evaluation should be investigated. Additional interesting perspectives that could be investigated in future research are summarized as:

• User studies for designing user interfaces • Market simulation investigating actual cost savings of the implementation for LEM participants, such as real estate owners • Practical investigations of the technological platform solution evaluating blockchain technology against other solutions • A deeper investigation of contractual agreements and whether the market operation should be based on continuous and auction-based trading • Investigate the delegation of balance responsibility of LEMs that are integrated with existing energy markets • Evaluate the suggested BM against successful platform players within other sectors

References

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Appendix A

Interview Template – Discussion Points

The development of today's energy market • Changes in the Swedish market and what it means for your company • Opportunities and barriers to market development • How to adapt solutions to keep up with developments Digitalization • Integration of smart solutions • Smart power grids • Value creation for customers • Market maturity for digitized solutions Local energy markets • Potential and opportunities in the Swedish market • Barriers • How the role of existing actors is changing • Optimal energy market from respondent’s perspective • technologies

Appendix B

The description of applications presented below were found through primary sources such as company websites, white papers, and corporate reports, as well as through secondary sources within the existing field of literature. These were collected 2020-04-21.

III

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