How is value created and captured in smart grids? A review of the literature and an analysis of pilot projects

Abstract

a b s t r a c tProfitable business models for value creation and value capture with smart grid services are pivotal to realize the transition to smart and sustainable electricity grids. In addition to knowledge regarding the technical characteristics of smart grids, we need to know what drives companies and consumers to sell and purchase services in a smart grid. This paper reviews 45 scientific articles on business models for smart grid services and analyses information on value in 434 European and US smart grid pilot projects. Our review observes that the articles and pilots most often discuss three types of smart grid services: vehicle-to-grid and grid-to-vehicle services, demand response services, and services to integrate renewable energy (RE). We offer a classification of business models, value creation and capture for each of these services and for the different actors in the electricity value chain. Although business models have been developed for grid-to-vehicle services and for services that connect RE, knowledge regarding demand response services is restricted to different types of value creation and capture. Our results highlight that business models can be profitable when a new actor in the electricity industry, that is, the aggregator, can collect sufficiently large amounts of load. In addition, our analysis indicates that demand response services or vehicle-to-grid and grid-to-vehicle services will be offered in conjunction with the supply of RE.

Managing electric flexibility from Distributed Energy Resources: A review of incentives for market design

“…Further developments could allow for flexibility trading not only at central markets, but also at local levels in which locational needs for flexibility could reduce network capacity problems [91]. Questions that remain are weather there should be one central aggregator or multiple aggregators for providing such services [26]. A very ambitious techno-economic approach on settlement of signals for DER management could be based on a nodal pricing mechanisms that would incorporate both grid and supply constraints at local levels [79].…”

“…Consequently, DER penetration could call for alternative trading models that focus on efficient flexibility trading for electricity flows at the lower distribution levels. Attempts have already been made with for example a local aggregator [26]. Besides the fact that decentralized management would yield benefits from more cost-causality based incentives, it could also encourage a new Table 3 Possible dynamic pricing options for DER management [78,82,83].…”

“…DER can provide value in smart grids with their electric flexibility [26], however a review of DER sources, their technical limitations for providing electric flexibility together with possibilities for economic trading of flexibility services is lacking. Consequently, this paper presents a review and classification of existing DER as flexibility providers and a detailed breakdown of trading platforms for DER in electricity markets.…”

Are building users prepared for energy flexible buildings?—A large-scale survey in the Netherlands

“…Previous research has discussed several factors that motivate users to adopt smart technologies in smart grids or smart homes [26,34,[36][37][38][39]. Based on these studies, we developed eleven factors for our questionnaire and used a Likert scale with 1 = ''strongly motivating," 4 = ''not motivating," and 5 = ''I do not care" as choices.…”

Review of distributed generation (DG) system planning and optimisation techniques: Comparison of numerical and mathematical modelling methods

“…reactive power management and voltage regulation) [101], biased allocation of subsidies for centralised power station development, limited access to regional electric power system development plan for private sectors, bureaucratic complications for licensing application [102], discriminatory use of system (UoS) charge imposed onto small generators [103], and lack of tax exemption. Specifically in Spain, off-grid DG system establishment is not permitted, and self-consumption end users must afford system and service costs [104].…”