Beware the value gap: Creating value for users and for the system through innovation in digital energy services business models

Ralitsa Hiteva and Tim Foxon

Abstract

This paper aims to provide a deeper understanding of the different types of innovations in digital energy services business models in the UK, and examine how they create and capture social and economic values, to users and the energy system. Business model innovations are represented in an Innovation Ladder to aid understanding of what social and environmental values they create and capture. Using a co-evolutionary framework, the paper unpacks the way technology, users, institutions, business strategies and ecosystems underpin the characteristics of business models at each level of the Innovation Ladder and examines the role of collective action and institutional density in negotiating the values created and captured for users and the energy system.

The paper uncovers two important value gaps, which question the ability of digital energy service business models to deliver more social and environmental value. The higher up business models are in the Innovation Ladder, the more value they create for the energy system but fewer benefits for users. The higher up business models are in the Innovation Ladder, the more abstract and limited the articulation of social and environmental values, exposing a weak link between digital innovations and the social and environmental values created and captured. Addressing these value gaps could contribute to achieving a successful transition to a net zero carbon energy system.

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