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Value Management - Characterisation of the Current Energy Value Chain (WA4 D1)

Citation Frontier Economics Value Management - Characterisation of the Current Energy Value Chain (WA4 D1), ETI, 2017.
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Author(s) Frontier Economics
Project partner(s) Frontier Economics Limited
Publisher ETI
Download SSH_SS1401_2.pdf document type
Associated Project(s) ETI-SS1401: Smart Systems and Heat (SSH) Programme - Value Management and Delivery
Associated Dataset(s) No associated datasets
Abstract This project studied how value can be delivered across a smart energy value chain - in the context of the UK. It built a clear understanding of how smart energy systems can deliver combined consumer value alongside commercial value for market participants - producers, suppliers, distributors. The analysis will help to make the commercial deployment of smart energy systems more likely. This £600,000 project was delivered by Frontier Economics, a leading economic consultancy.

Work Area 4 (Value Management and Delivery) addresses the key issue of how value can be delivered across the entire smart systems value chain (in the context of the UK). The premise here is to understand how smart systems can deliver consumer value along with commercial value to all market participants. The scope of work in relation to this deliverable comprises of an assessment of the current energyvalue chain and value delivery and considers current value chains for mains gas, electricity, district heating, heating oil and heating enabling technologies. This has been completed in order to identify the current drivers of business models and value delivery mechanisms such that we can then identify where any opportunities, or barriers to change, exist. This will then inform our consideration of future business models and their applicability to SSH moving forward. Key conclusions are:-
  • The basic characteristics of the energy value chainshave led to deep policy and regulatory interventions that largely shape energy sector business models. This will not change and policy needs to be recognised as a primary driver of future business models.
  • As a consequence, policy and regulatory change is a primary facilitator of business model change.
  • Management of fuel price risk drives both business models and value propositions.
  • Access to financeas a driver of business models is likely to become increasingly important.
  • There are significant barriers to change in the energy sector on the supply and demand sides.
  • Despite these barriers, substantial new opportunities for new businesses will arise in response the challenges associated with a move to the low-carbon economy.