Mapping service business model types in the ecosystems of behind-the-meter battery energy storage systems

Abstract

The climate goals of the EU necessitate the decarbonization of the energy sector, driving demand for renewable energy technologies. Wind and solar power provide viable alternatives to fossil fuel based generation, but their intermittent and non-dispatchable nature increases the electricity system’s need for flexibility. Because grid stability requires real-time balance of supply and demand, different storage technologies have emerged, such as battery energy storage systems. The majority of commercial interest and institutional reporting focus on utility-scale BESS projects, leaving BTM BESS assets overshadowed, even though BTM BESS assets offer a wider range of applications. This thesis applies servitization and business ecosystem theories to the BTM BESS sector and investigates how business models are configured to deliver BTM BESS value propositions. Additionally, even though BTM BESS assets are increasingly more accessible, complex market mechanisms and high upfront investment cost hinder adoption. This thesis assesses the maturity of servitization within the BTM BESS sector and examines what kind of servitized offerings are available to the market. To meet the research objectives, this thesis utilized a multiple case study to investigate common patterns and differences across several cases in Finnish context. The method is well suited for examining multifaceted business problems and in this study, it relied on semi-structured interviews for empirical data collection. The empirical data comprised 18 interviews across companies representing the full spectrum of BTM BESS market entrant origins identified in the literature review. The content was analyzed using thematical analysis by utilizing data analysis software MAXQDA Analytics Pro. The empirical findings indicate that service-oriented models are attractive to customers as they lower the entry barrier for customers and they are transparent and easy to understand. Servitized models are difficult to implement for companies as they require significant capital to bear the CapEx costs. Moreover, BTM BESS value creation divides the benefits to liquid market returns and unliquid local savings, which does not provide enough cash flow to support the service model without upfront fees for the customer, compounded by the complexity of verifying and measuring localized savings. This study also highlights the significance of BTM BESS non-dispatch, secondary value elements such as BTM T&D investment deferral, mobility, and real estate liquidity or value increase. This study also identified four distinct BTM BESS business model archetypes and provides granular examination of their business model configurations, value propositions and value capture mechanism. This study contributes to existing literature in industrial service system and servitization literature by applying it to the BTM BESS sector. This study also investigated the BTM BESS business model configurations in greater detail than previous inquiries and assessed the current maturity of servitization in the sector. Additionally, this study highlights secondary value drivers that have largely been overlooked in prior research.