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Policy Brief / Electricity

New Business Models in Electricity: the Heavy, the Light, and the Ghost

Author(s): DOS REIS Piero Carlo, GLACHANT Jean-Michel, ROSSETTO Nicolò

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  • New ways to create and capture value are emerging in the electricity sector, with important implications. An understanding of their key drivers is fundamental.
  • Wind and solar, the two fastest-growing renewables, require investments in long-lived physical assets with negligible variable costs. Green generators must identify revenue streams that cover the upfront costs. While public support policies have mostly guaranteed generators’ income in the past, market-based solutions are now appearing.
  • Digitalisation is a second big change, currently addressing retail size units, expanding the availability and usability of information and the controllability of all the interconnected devices. Building on that, new players can develop innovative services targeting specific groups of customers without the need for a significant investment in physical capital.
  • Greening of generation and digitalisation of retail-size units deeply affect the activities of electricity grids, both transmission and distribution. The existing regulatory compact no longer looks suitable for adapting the current business model of grid companies.