Development and real-world application of a taxonomy for business models in local energy markets

Highlights: • Taxonomy development for local energy market business models from expert interviews. • Business models shift their focus from utilities to residential agents. • Development of a local energy market platform is the prevalent business model. • 9 case studies show that current applications focus on market and transaction fees. • Local energy market business models need to mature for real-life applications. -- Abstract: Local energy markets are often discussed as a means to solve the challenges of decentralization, decarbonization and digitization emerging from the energy transition. However, their (potential) business models, and thus their rationalization in our economy, remain largely unknown. Suitable business models are required to leverage economic benefits from local energy markets. We follow a multi-method approach to develop a taxonomy of local energy market business models. Firstly, we conduct 15 semi-structured expert interviews to gain first-hand knowledge of current and future business models. Secondly, a taxonomy development method is applied on the interviews in an iterative process. Our results show that the most profitable and long-term sustainable local energy market business models should focus on financial benefits as their main value proposition, should be consumer- and producer-centric, and should develop a trading platform offered by a service provider. A focus on energy and flexibility trading, and a highly interoperable information system aid the business success. Lastly, we compile an overview of current business models in nine real-world local energy market projects and apply the taxonomy to their business models. This case study shows that the implemented business models are very similar and only represent a small part of the discussed business models of local energy markets in the taxonomy. This shows that the implemented local energy market business models are currently in their very early development stages. They need to mature in line with the further development of local energy markets.