Regulatory risk and the resilience of new sustainable business models in the energy sector

• Published in: Journal of cleaner production 2019-05, Vol.219, p.865-878
• Main Authors: Leisen, Robin, Steffen, Bjarne, Weber, Christoph
• Format: Article
• Language: English
• Subjects: Business model innovation; Energy transition; Niche markets; Regulatory risk; Sustainable business models
• ISSN: 0959-6526; 1879-1786
• DOI: 10.1016/j.jclepro.2019.01.330

The energy sector has long stood out for both its important role in economic prosperity and its major environmental impact. Recently, three key developments have affected the energy sector in many countries, namely the clean energy transition, market liberalization, and digitization. These developments enabled new business models in a coevolving regulatory landscape. While previous research showed that support policies played an important role in enabling sustainable new business models, little attention has been paid on the question how dependent these business models are on specific regulations, and hence to which extent are they at risk of becoming obsolete after a regulation changes. Here we address this gap by studying how new sustainable business models in the energy sector work, and by investigating their risk profile, especially concerning the risk of regulatory changes. An extended case study analysis for the case of Germany, including interviews with 34 experts from 24 companies, examines 6 new business models in detail and estimates the probability and impact of 108 individual risk events. Results show that regulatory risks mainly concern revenues (as compared to costs) via two channels: directly in cases where regulations set prices, such as for feed-in tariffs or tax exemptions; and indirectly in cases where regulations define who is allowed to compete. Finally we discuss policy implications, also taking into account that many new business models are service-oriented and as such “asset light”. [Display omitted] •Empirical analysis examines six new sustainable energy business models in Germany.•New business models build on clean energy transition, liberalization and digitization.•Reliance on specific laws puts business models at risk if regulation changes.•Such regulatory risks affect revenues, e.g. by deciding who is allowed to compete.•Policy makers need to decide when to opening and destruct market niches.