Strategic Market Entry for Energy Aggregator Firms in the Netherlands

Abstract

A profound change is occurring in the Dutch energy system and significant growth in energy production from renewables can be observed. This requires flexibility solutions to balance the demand and supply of electricity. As described by the European Union in the Clean Energy Package, aggregators have the important responsibility to provide this flexibility.
A literature review identified that it remains unclear how firms entering the Dutch energy market as an aggregator can design their business strategy and business model and therefore a conceptual model based on 7 strategic components and 9 components of the Business Model Canvas has been established.

In order to explore potential business strategies and business models for firms entering the Dutch energy market as an aggregator, a qualitative study has been done by collecting primary data through interviews.
The interviews identified several findings that are used to complete the conceptual model. The study identified that aggregators can focus on both the B2B and B2C customer segments and that a number of key partners exist such as energy suppliers with an already large customer base, as well as seeking partners to fulfill the requirement of a Balance Responsible Party. It has been found that aggregators require a number of essential capabilities and resources such as IT knowledge and staff, and require algorithms for predictions of electricity price, demand & supply, and weather. Several revenue streams can be used by aggregators, however, the flexibility from customers’ assets can be currently sold with the highest profits in the imbalance market. Additionally, the study identified the fundamental strengths and weaknesses of aggregators, the elements required in an aggregator's value proposition, and other factors as part of the conceptual model.

Depending on the technical and regulatory specifications of other countries' energy systems, the findings of the study are to some extent generalizable and can be used by researchers to investigate opportunities for aggregators' market entry in these countries. Furthermore, the findings of this study can be used as a tool by actors in the Dutch energy market that consider providing aggregation services, to design their business strategy and business model and to create awareness of their opportunities in the market.
The study's proposed models might be provisionally acceptable as a business strategy and business model for firms involved in aggregation but should be validated further by research and implementation in practice. It is recommended that policymakers enable and stimulate aggregators in the Netherlands, for example by introducing subsidies, as the study found that achieving a profitable business case is a challenge for aggregators and considering the fact that aggregation does not only bring economic benefits but also ecological benefits that bring value to society as a whole.