The unfolding energy transition is characterized by rapidly growing renewables, distributed energy resources (DERs), electric vehicles (EVs), increasing customer demand for new energy services, ambitious climate targets and cross-industry convergence. And all is further complicated by the impacts of the COVID-19 pandemic.
With this energy transition comes an array of new possibilities. Our latest New Energy Consumer research takes a critical look at what this means for energy companies over the coming decade. Among the most compelling opportunities: a variety of connected energy business models related to distributed energy resources (DERs) and eMobility (electric vehicles, or EVs). However, the question remains: Which will be profitable?
Our findings suggest connected energy business models could yield between €7.2 billion and €8.8 billion of total EBITDA across the industry within 10 years.
This report explores those connected energy business models centered on DERs and eMobility across six key European countries: Spain, Italy, France, Germany, the Netherlands, and the United Kingdom. Through our assessment, we identify where we believe value will exist in 2030 and lay out pathways for energy companies to make these new business models a reality.
Connected energy business models offer the potential for significant growth over the next 10 years.
For the core of our analysis, we examined four strategic plays energy companies can consider as they look to the future.
Energy Value Provider: Commodity focus, with value-added perks to improve retention.
Energy + Home Services Provider: Adding “status-quo” services in tandem with commodity.
Connected Energy Services Provider: Offering future-forward energy products and services.
Beyond Energy: Pivoting to address emerging needs in the new power ecosystem.
The “Connected Energy Services Provider” play focuses on emerging energy business models nearing their tipping point. Here, energy companies can offer future-forward products and services in areas like eMobility, DERs, energy management and flexibility.
The focus for eMobility is on business models related to EV charging infrastructure and services. DER business models focus on rooftop solar, battery storage and smart heating applications such as smart heat pumps and smart water heaters.
For batteries and smart heating, energy companies can also offer flexibility services that allow customers to tap into the devices’ storage capabilities, which in turn helps to improve their efficiency behind the meter and aggregate and sell the flexibility externally in the markets.
Retail energy management services are included as components of several models such as rooftop solar + storage, standalone storage and smart water heating, which rely on these services to operate and create value.
A menu of pure-play connected energy products and services
Several of these business models can be offered via two distinct, but not mutually exclusive, approaches to asset ownership—Buy and Lease/Rent. Both can play a part in an energy company’s portfolio of services to suit different customer needs. In addition, in some cases, such as public EV charging, the asset is simply “Used” by the customer rather than bought or leased/rented.
Charting a path with eMobility and DER
The key questions quickly become: Which are the optimal growth models to pursue? What are the appropriate products and/or services to offer alongside existing ones, and how should they be bundled? The ideal path forward for energy companies will naturally depend on market and business context as well as target customer segment characteristics, but will likely reflect a mix of eMobility and DER business models, with potential for both Lease/Rent and Buy approaches.
The value opportunity for eMobility is projected at approximately €5 billion in 2030 for the six countries we assessed. We estimate that more than 40% of this value will be in home and fleet charging for B2B and B2C applications. Nearly 30% of the total value is projected to come from the sale of additional electricity needed to meet the demands of the growing number of EVs. Value opportunities also come from charging on the go, roaming charging and demand-side flexibility.
Distributed energy resources pure-play services
In 2030, value opportunities for DER business models are projected to represent approximately €3 billion for the six countries we assessed. These business models can be considered “by technology,” or alternatively “by service.”
By technology, the DER opportunity can be viewed in two key categories: rooftop solar and battery storage, and electrified heating. By service, about three-quarters of projected value is associated with the Lease/Rent asset ownership approach—subscription services primarily for standalone rooftop solar and rooftop solar + storage models.
Standalone rooftop solar contributes 54% of the total EBITDA market for DERs in 2030, and rooftop solar + storage represents most of the remaining potential (45%), with only limited opportunity from electrified heating.
Bundling for greater benefit
Bundling across multiple business models could offer value greater than the sum of its parts. We see great untapped potential for energy companies here. The opportunity for energy companies to offer true end-to-end bundles could represent a strong differentiating factor against other entrants competing in the energy services space.
Making new business models a reality
When considering the pursuit of future energy business models, timing is key. We see three value pathways that can help structure planning and execution: one that is currently viable, and two that are likely to become more broadly viable at scale in the future.
Value pathways to help make new business models a reality
For energy companies, the window of opportunity is open, but time is of the essence. Toexecute effectively, the shift from a commodity-centric business to a digital energy servicescompany will be part “evolution” (leveraging and building on existing capabilities to play to competitive advantages), and part “revolution” (rapidly developing the new capabilities necessary for successful execution).
Navigating these challenges will not be easy, but the energy companies that do so can successfully position themselves to execute and capture value as the energy transition continues to accelerate.