Can innovative business models catapult distributed energy and connectivity into the mainstream?
Around the table there are animated discussions as we debate, analyse, and challenge each other as we discuss the latest in a series of Delta-ee reports on business model innovation. One thing we found ourselves repeatedly asking is: “Can innovative business models really catapult distributed energy and connectivity into the mainstream?”
Bold moves by some –a diverse range of small companies not scared to have a go
So far some have promised a lot but not delivered – for example Lichtblick in Germany in 2010 - whose “virtual power plant” of mini-CHP systems stole the imagination of many - but fell far, far short of its 100,000 unit ambitious target.
Others, such as SolarCity, with their market-leading “PV for free” model have grown rapidly. The company was only formed 8 years ago but has a reported 25% share of the burgeoning US PV market. Nest Labs is another high profile success. The silicon-valley based company didn’t exist five years ago but grabbed the headlines when it was snapped up by Google for $3.2billion. As well as selling smart thermostats, it’s tapping into the energy market through its ‘Nest Rush Hour Rewards’ demand response offering in the US.
There’s a huge number of innovators trying to join these companies.
For example a small social enterprise in Scotland called iPower - in partnership with CFCL - has started offering fuel cell to customers for free. With fuel cell usually costing the same as a family car, this is made possible by its “ESCO-lite” business model.
Flow – started life as a technology developer of micro-CHP but then added an energy supply business to its portfolio. Flow will soon be offering an innovative financing proposition for their micro-CHP product and have recently extended a contract with a major manufacturing partner to produce half-a-million units.
Insero – a small Danish company is proposing a business model that makes revenue from financing and influencing the operation of heat pumps as part of a smart grid and selling the end-users heat for their home.
There are risks but flexibility and speed will help innovation succeed
We track a wide range of innovations in the distributed energy, heat and connectivity markets. Many will fail, but – as Nest and SolarCity have shown, some will succeed – and secure new opportunities emerging in the energy and connectivity markets.
Innovation is risky, and can’t rely on a “rear view mirror” approach to the market. However, robust research to identify value creation opportunities – and building the customer into innovation - is a critical ingredient for success. Launching propositions in the market – and iterating rapidly around these – is the only way to ultimately become the next Nest or SolarCity.
Innovative business models will play a critical role in catapulting distributed energy & connectivity into the mainstream - but only the most agile companies will survive.
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