**Acknowledgements**

*4.2.3. Value network: expanding customer-base*

18 Energy Systems and Environment

*4.2.4. Core strategy: animating business-model innovation*

The business model of the traditional utility pursues expansion in asset-based and, through its commodity-focused strategy, increases shareholders value. The goal of the conventional utility, as such, can be conceptually positioned at one end of a profit-motivation spectrum: the "motivation to build incremental assets for the primary purpose of expanding its ratebase" [60]. Because regulators reward or chastise utilities for decisions to achieve certain public-policy goals and to maintain "just and reasonable revenues," this model faces mounting challenges—especially in a DER framework. So-called "incentive regulation," however, establishes the working conditions of the utility. Within these conditions, "[g]iven any set of regulations, utilities participate in actions which most benefit their principal constituencies shareholders and management—while meeting the requirements of the regulations" [61]. Because the principal constituency of the investor-owned utility is its shareholder base, REV seeks to expand utility customer-base through *value addition* to scaling economic efficiency.

All the major distribution utilities in New York support the REV vision for long-term innovation in the industry and have submitted proposals for pilot projects. Additionally, a number of utilities have began implementing "flexibility products and services" such as distributed solar PV inverters, real-time transactions, demand response, and pricing of reserves that would enable them to obtain electricity from the most flexible resources. Response to these market changes, however, depends on adaptations in the utility regulatory landscape. Nevertheless, the dependence of the modern society on a stable and reliable electricity system require that these innovations should be ongoing throughout the lifetime of the electricity grid infrastructure.

The transition from centralized to decentralized renewable electricity governance animates business-model innovations to address "death spiral" concerns and inefficient resource allocation. REV's core strategy addresses market risks in New York by increasing DER deployment, increasing transparency in utility ownership, incentivizing low-carbon electricity generation, and aligning utility profits with DER deployment [45]. However, as [36, 62] caution, these innovations must not be construed as attempts at regime preservation rather than market adaptations for fostering 'polycentric' business-model innovation. In other words, the REV docket's core strategy positions political and economic innovations of the utility landscape to optimize customer-focused operations and return on environment. For instance, the role of the ESCOs which currently provide only commodity services (e.g., energy efficiency investments) are expanded to include more classes of electricity services including consulting and

The key objective of this chapter was to evaluate the viability of the Hamel business model and its application to evaluating the New York's REV vision and the state's path for optimizing distributed energy future and customer choice. The Hamel framework proved to be a valuable analytical business model methodology in this context. The chapter reveals that residential and commercial rooftop solar electricity generation systems is expanding in

analytic services to help consumers dynamically manage their energy bills.

**5. Conclusion**

This work was supported by the Utility of the Future project that is co-sponsored by the Center for Energy and Environmental Policy (CEEP) at the University of Delaware and the Foundation for Renewable Energy and Environment (FREE).
