Emerging business models for smart local energy systems (SLES)

Achieving net zero in the UK stands its best chance of success if local energy infrastructure works in a smart and connected way. Given the scale of the challenge, few local authorities have a clear plan to make that happen owing to lack of funding, resources and skills, but there are major steps they can take – from good local area energy planning (LAEP) to the creation of smart local energy systems (SLES).

As part of the Innovate UK-funded Prospering from the Energy Revolution (PfER) programme – which aims to accelerate innovation in SLES – Energy Systems Catapult analysed the approach and lessons learnt from 25 smart local energy projects attempting to deliver a local, integrated approach for net zero.

What is a smart local energy system?

A Smart Local Energy System, or SLES, is a way to bring together different energy assets in a local area and make them operate in a smarter way. They could be connected physically (e.g. a solar farm powering a housing development) or digitally (e.g. a virtual energy marketplace). They will help a local area decarbonise more quickly and cost effectively, and can deliver wider social and economic value for communities.

Our insight paper identifies five emerging business models for SLES, and how – by making designs more investable, replicable and scalable – they can help deliver value to local communities as they try to decarbonise.

We’ve created the models to give local authorities an introduction to the innovations happening within PfER, and – taken as a companion piece to local area energy planning (LAEP) activity – provide strategic guidance to inform their own net zero plans.

Each model considers:

  • Benefits of the business model and the value it can deliver to the local area
  • Risks and considerations for those looking to set up new projects
  • Different roles the local authority could play in the business model and how they might interact with other key delivery partners

Five types of Smart Local Energy System

Project Marketplace – An organisation or digital platform that takes the lead in finding local renewable energy projects and linking them to investors and the supply chain, increasing visibility and credibility of renewable projects while decreasing costs and risks.

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Local flexibility market – A single buyer creates a market and incentives for more flexible use of the local power system, sending out price signals to aggregators and energy asset owners in the area and enabling local businesses and homes to provide flexibility.

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Local energy market – A marketplace that matches local energy users with local green energy assets like solar, storage and EV charging. Local users can buy directly from a local generator or buy other energy services available in the market.

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Virtual network manager – An organisation creating a virtual balancing system that optimises local generation and demand, commonly used in constrained areas where new grid connections are difficult or expensive. Allows faster roll out of low carbon technology.

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Anchor asset – A major local energy asset like heat networks, EV charging hub or storage into which other energy assets are linked, reducing carbon emissions or costs for end users and delivering low carbon services to locals.

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Find out more about these SLES business models – including the role local authorities play and how local communities can benefit – in the full paper below.

Read our Insight Paper

Emerging business models for smart local energy system (SLES)

Decarbonising Local Places

An independent, whole systems approach to accelerating Net Zero in local places by developing low carbon markets, attracting investment and creating jobs.

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