Energy business models
As more households and businesses have started generating their own energy in recent times, an explosion of new business models to buy and sell energy, particularly electricity, have evolved beyond the traditional model of consumers purchasing energy from large retailers. These new business models vary in degrees of complexity, and the pros and cons for your particular circumstances should be thoroughly evaluated before committing to one of these alternative arrangements.
A selection of different types of new energy business models are described below, noting innovative arrangements for buying and selling energy continue to evolve. The business models discussed are:
Virtual power plants
A virtual power plant (VPP) can be created if distributed energy resources such as solar, batteries and demand management technologies in the community are pooled together with cloud-based software aggregating and managing generation capacity and loads within the portfolio. The controller is owned privately either by an organisation, collection of owners or an individual. A VPP can include a collection of generators located across a large area and do not need to be directly connected. The controller can monitor generation and weather forecasts from multiple sites and optimise the distribution across multiple loads and export opportunities. All connections to a VPP require a stable internet connection.
Peer to peer trading
Peer to peer (P2P) energy trading sees participants of the energy distribution network buy and sell energy directly with each other encouraging multi-directional trading locally. Participants can act as energy producers, energy consumers or both – a prosumer. This diversity is particularly important when using renewable energy for generation as it allows flexibility in generation and consumption, that is, when one generator is experiencing conditions that prevent optimal generation, another generator that is experiencing a surplus of generation can support the other.
Utilising online trading platforms, peers either operate as individuals or a community can aggregate as a single, active entity on the market. The controller is a key element in P2P trading enabling participants to manage their trading arrangement, configure preferences and risk profiles, for example, preventing export of power when prices are below a certain threshold. Once parameters have been established the controller and virtual platform will automate day-to-day transactions.
Microgrids are small, decentralised energy networks with local control. There can be one to many users in the microgrid. Usually a combination of wind and/or solar generation, with battery storage, is utilised. Microgrids have the feature of being able to operate disconnected from the main electricity grid (island mode), either on a permanent or temporary basis. Microgrids are generally more suited to off-grid and fringe of grid locations to address issues of poor energy security. Arrangements for microgrids that cross property boundaries can become complex, for example, determining who owns and who has responsibility for maintaining microgrid infrastructure.
Energy as a service
Through leasing, consumers commit to paying a certain amount of money for the use of renewable energy technology, such as solar panels, avoiding the need to make a large up-front capital investment to access renewable energy. Leasing provides panel manufacturers and owners with an incentive to ensure a long lifespan and high quality repairs and maintenance. Leasing solar panels is popular in some overseas countries, but is not a widely adopted practice in Australia, primarily due to policy differences and the longer return on investment for leasing.
Power purchase agreements
Power purchase agreements (PPAs) are an alternative to leasing and ownership whereby consumers commit to buy a certain number of kWh of energy from a provider. The provider could be generating the power at the consumers site or the power could be transmitted from another location. The provider is responsible for the maintenance, repairs and recovery of the generating equipment. PPAs require long term commitments, typically ten or more years.
Also, see a summary (PDF, 194.89 KB) or the full report (PDF, 2785.26 KB) of Energetics' report "Distributed energy resources for primary industries" for more information about the features of a variety of energy business models.